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

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

Carlo and Dino Taurasi, who founded Woodbridge-based StateView Homes in 2010, accuse Daniel Ciccone of conducting a yearlong "cheque-kiting scheme," involving hundreds of bad cheques, 22 accounts at 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 say Ciccone wrote "hundreds and perhaps thousands of unauthorized cheques" drawing from inactive Royal Bank of Canada (RBC) accounts related to old projects.

According to the claim, he allegedly deposited the cheques into TD Bank accounts, then stopped payment on them — after TD provisionally credited the accounts and before the funds were transferred from RBC.

"Mr. Ciccone exploited TD's and RBC's failure to provide any or sufficient safeguards against cheque kiting schemes to perpetrate a $37-million fraud on the Taurasi business accounts," the claim states.

None of the allegations have been tested in court. Ciccone has indicated in a court filing he intends to defend against the action, but hasn't yet filed a statement of defence. Ciccone does not face criminal charges. His lawyer declined further comment.

The claim alleges Ciccone used the funds for "unknown purposes" and that he covered the overdraft with legitimate funds or through more cheque-kiting.

The lawsuit also names RBC and TD Bank as defendants, arguing the financial institutions allowed the kiting to continue for a year without detection. And it argues that the Taurasis, who were the account holders, should have been informed earlier.

"Due to RBC's and TD's negligence, Mr. Ciccone was able to defraud the Taurasi 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 can't comment while the case is before the courts.

8 StateView projects enters receivership

The alleged cheque-kiting scheme was made public last April when TD Bank filed a lawsuit against StateView Homes and 25 associated companies, seeking to recoup the overdrafted $37 million.

At the time, the brothers said they had no involvement in Ciccone's "wrongful conduct" and had fired him. StateView entered into a settlement agreement to begin paying back the money immediately.

In response, four of StateView's major creditors successfully petitioned for the appointment of a receiver to recover their outstanding loans.

The Ontario Superior Court of Justice appointed KSV Restructuring as receiver in May 2023, giving it control of StateView's Nao Towns, Nao Towns II, BEA Towns, Highview, Minu Towns, High Crown Estates, Elm and On the Mark projects, along with a holding 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 defence, according to his lawyer. (Instagram/StateView Homes)

The receiver reported later that month that the StateView companies took in $77.2 million in deposits from 765 homebuyers for those projects, but that as of May 1, 2023, the receivership companies only had $1.095 million in their bank accounts. It found creditors were owed $349 million in mortgages.

The Home Construction Regulatory Authority then suspended the licenses of 14 StateView companies in June, saying it was concerned about allegations of financial mismanagement. There are currently no StateView entities with an active licence, according to the HCRA, meaning they can't legally build homes in Ontario.

Brothers say CFO told them 'I f-----d up': lawsuit

The Taurasis say in their claim that 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 the credentials to access online accounts, according to the claim.

The claim says the business appeared to be going 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 f----d up,'" it says.

Ciccone eventually informed them that "with the help of certain TD staff" he had been overdrawing the companies' TD accounts to "support the business's capital funding," according to the claim. The Taurasis say Ciccone told them in three weeks he would receive funds that would "make TD whole" but that the overdraft was about to be discovered and "his contacts at TD were on vacation."

"Mr. Ciccone broke down in tears, claiming that he had acted for the benefit of the company and the 'family' but that it would appear to the bank that he was 'kiting' and that he might go to jail," the claim says.

Eight of StateView Homes' residential projects were placed into receivership in May 2023 after TD Bank sued StateView Homes to recoup the $37 million and several of the developer's creditors came after their outstanding loans. (Paul Smith/CBC)

The Taurasis say they remained unaware of the stopped RBC cheques and had no knowledge that their TD accounts had accrued $37 million in overdraft until days after that conversation.

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

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

The Taurasis say they're now personally liable in at least 10 ongoing court claims from StateView creditors and buyers, including a proposed class action seeking the return of deposits lost when StateView became insolvent.

"Daniel's wrongful actions and TD's and RBC's failure to detect them has harmed us, our company, our customers and our stakeholders," the Taurasis said in a statement.

"We are left to seek justice through the courts and will do so vigorously."

Buyer contracts cancelled as projects sold

Last June, Superior Court Justice 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 those sales have already closed.

The sales process stipulates the buyers of the stalled StateView projects aren't required to honour agreements signed by the individual homebuyers who put down thousands of dollars each in deposits for homes before they went into receivership.

Tarion, Ontario's home warranty agency, has warned homebuyers with sales agreements for units at several of the receivership projects that those agreements already have or imminently will be cancelled, and they have no prospect of purchasers recovering their deposits through the receivership. Buyers whose contracts are cancelled can submit claims through Tarion and could receive money back for deposits up to $100,000.