Toronto – The Ontario Crown Attorney’s Office withdrew criminal charges against a Toronto man accused of operating a multimillion-dollar Ponzi scheme partly because the court lacks resources, CBC News has learned.
According to a report filed by a court-appointed receiver, Tzvi Erez, 43, used a series of expertly forged documents to defraud more than 70 investors of $27 million.
But in an email from Crown attorney Christine McGoey obtained by CBC News, the Crown said one of the reasons it decided not to pursue the case was because of the competition over trial time.
“There are very serious criminal matters competing for limited trial time, with cases being stayed because of delay,” wrote McGoey. “And we have to consider the impact of any delay that might occur throughout the process and the variety of factors that are taken into account in assessing which cases will go to trial before others.”
In June 2009, Erez was charged by Toronto police with one count of fraud over $5,000, seven counts of forgery and one count of violating his probation on a prior fraud conviction. The charges were based on evidence provided by one of Erez’s alleged victims, Willy Tencer.
According to a Sept. 30 memo written by Tencer’s lawyer, Lou Brzezinski, assistant Crown attorney Donna Gillespie told him the charges were dropped “because the courts were tied up with more serious criminal matters [such as rape and murder].”
Brzezinski, whose client invested more than $1.2 million with Erez, claimed Gillespie said that “court time and availability of judges were insufficient … and as a result, hard choices had to be made.”
Gillespie did not respond to requests for an interview. Ontario Attorney General Chris Bentley also declined to be interviewed.
Victim should have known better: Crown
The Crown was at risk of denying Erez his right under the Charter of Rights and Freedoms to be tried in a reasonable period of time. More than 16 months after charging Erez, the Crown still had not fulfilled its requirement to disclose evidence to his lawyer, Edward Greenspan.
“As I indicated to you, the Crown would very likely face an abuse of process motion should the course of action be pursued,” McGoey wrote in her email.
The Crown also suggested another reason charges were withdrawn was because the victim should have known better.
In her email, McGoey said the complainant in the case “was an experienced businessman” but he did “not seek to verify the invoices of the suppliers.”
Assistant Crown attorney Gillespie echoed that consideration when she appeared before court to have the charges withdrawn.
“The Crown is not attributing blame to the complainant, of course, but before investing large amounts of money in a business venture, an experienced businessman would endeavor to confirm the legitimacy of the business transaction and there should be due diligence on behalf of the lender or the investor before doing so,” she said.
But neither McGoey nor Gillespie addressed the validity of the fraud and forgery charges against Erez. Erez’s alleged fraud first was exposed following the February 2009 bankruptcy of his Toronto printing company, E Graphix.
The evidence appeared to be overwhelming, according to a 295-page report filed in Ontario Superior Court by receiver Jerry Henechowicz, whom the court appointed to vet investor claims and locate and seize assets as part of the civil bankruptcy proceeding against Erez’s companies.
“It is clear from the receiver’s investigations that Tzvi operated a ‘Ponzi’ scheme,” states the report. The report also stated that Erez obtained tens of millions of dollars in loans for his printing business based on documents that turned out to be elaborate forgeries.
“Investors would be provided … forged purchase orders, invoices and other documents to support what was presented as a highly profitable yet underfinanced print-brokerage business.”
Erez targeted investors from the Jewish community. His stepfather is a well-known real estate developer, and Erez graduated from two of the city’s most established Jewish parochial schools, Associated Hebrew Schools and the Community Hebrew Academy of Toronto.
“We were played very well,” says Elliot Steiner, a Richmond Hill real estate developer who invested $225,000 with Erez. “It never occurred to me that somebody would do this,” he said.
A piano prodigy who produced a couple of CDs and performed live at concert halls in Toronto, Erez put people at ease with his clean-cut, baby-faced appearance and studious manner.
“He’s just a regular guy,” says Steiner. “You know, you’d see him in the breakfast restaurant every day, and you wouldn’t notice him in the crowd.”
After the alleged fraud was discovered, Brzezinski provided Toronto Police with all the documentation gathered during the receivership. His client, Tencer, gave police a sworn affidavit and supporting documentation detailing the alleged scheme.
Several other investors also contacted police and offered to give statements. But many investors, including Steiner, did not come forward, believing instead that they would be contacted in the course of the investigation.
Instead, the police brought charges based only on the complaint of Tencer.