Sam Sorbara was 14 when his family fled the poverty of an Italian village in 1925 and settled in southern Ontario. His alcoholic father all but abandoned the family and his mother died within a few years of arrival.
After the Great Depression hit, Sam’s family worked the streets to survive. They bootlegged booze and stole coal to stay warm. Sam was caught using counterfeit bills in Toronto and sentenced to three years in jail.
Later, he sold mineral feed to farmers in the Toronto region and started buying land from those anxious to sell. His efforts eventually made him a leader in Toronto’s Italian-Canadian community and a wealthy man. When he died in 2002, at the age of 91, he left behind the family-run Sorbara Group, a multi-faceted real estate company with current assets estimated by one of its owners at $1.4 billion.
His legacy is now under threat. The company he founded has torn his family apart. His four children — including former Ontario finance minister Greg Sorbara — are locked in a bitter succession battle that has placed the company’s future in doubt.
“It’s cause for real sadness,” says Greg Sorbara, “another situation where money poisons enduring family relationships.”
Each sibling owns 25 per cent of the Vaughan-based private company. It develops and builds commercial buildings and low- and highrise housing, along with providing financial services. It owns, operates and manages more than eight million square feet of industrial, commercial, office and residential properties.
The legal part of the family feud began in October 2016, when Joseph Sorbara, the oldest of Sam’s children, filed an application in Superior Court against his siblings — his brothers Greg and Edward, and his sister, Marcella Tanzola.
Joseph, who is 76 and co-ran the company for three decades, has asked the court to declare that his siblings “have engaged in conduct that is oppressive and unfairly prejudicial” to his interests in the company. He also requests that it order his brothers and sister to do one of two things: buy Joseph out or liquidate the company and divvy up the proceeds.
“Joseph has lost all confidence in his siblings, and in particular Edward and Gregory and their ability to look after the best interests of the Sorbara Group,” says Joseph’s application to the court.
“Joseph and Edward have irreconcilable differences with respect to the day to day running of the Sorbara Group and its future plans and on this basis it is no longer possible for them to carry on in business together,” his application adds.
The application makes clear that at the heart of the dispute is Joseph’s attempt to have his eldest son, Paul, “ultimately take over his role as the co-chief executive officer of the Sorbara Group.”
But in August 2014, “Gregory, with Edward’s support, deliberately fired Paul without cause.” Joseph’s application claims the firing occurred after Paul “discovered that the presentation of the Sorbara Group’s financial materials appeared to conceal poor performance and a substantial underperformance of the Sorbara Group’s sales targets.”
The application’s claims haven’t been tested in court.
In a written statement to the Star, Greg Sorbara says Joseph’s allegations of “oppression” began about two months after Paul was “terminated.” He denies the financial allegations and adds that the company has performed “stronger than ever” in the past five years, and earned “unqualified audit opinions” from auditors, which means financial statements fairly represented the company’s financial position and results.
“Disputes often occur in family-run enterprises, especially when it comes to issues of intergenerational involvement and succession,” adds Sorbara, who at 72 is the youngest of the siblings.
“Obviously we are disappointed and saddened that this dispute has not been resolved amicably, and while we hold out hope that an amicable resolution will eventually be reached, for now we are addressing Joseph’s concerns in the court proceedings.”
Greg Sorbara adds that the company employs more than 200 people and has “60+ stakeholders consisting of our extended family.”
“This creates an enormous responsibility for our management team, which is why we have always insisted that senior executive positions be assigned based strictly on merit,” writes Sorbara, who has six children and 15 grandchildren. “We believe that is in the best interests of the business and our many stakeholders, including Joseph and his family.”
He said affidavits that respond to Joseph’s claims have not been filed with the court and can’t for now be shared with the Star. He adds that his side can’t comment on the merits of the case because it is before the courts.
Requests to interview Joseph and Edward, made through their lawyers, went unanswered. Paul Sorbara also did not respond to interview requests.
“You should wait for the (court) hearing if you want the whole story,” said Joseph’s lawyer, Alan D’Silva, of Stikeman Elliott LLP, adding it would likely happen next April or May.
By 2016, the dispute allegedly resulted in personal insults.
Joseph’s application states that while he was hospitalized for an intracerebral hemorrhage in June that year, Edward emailed “many” Sorbara family members claiming Joseph “had not done any meaningful work throughout his 30 plus years at the Sorbara Group.”
The email, the application adds, also accused Joseph of “taking advantage of their sick father to impose himself in the business” and “personally insulted (Joseph) and members of his family in the most destructive of ways.”
The dispute is shaking the foundation of the house that Sam built. It dates back to 1942, when the patriarch started Adriatic Insurance Brokerage, a company that expanded into the real estate business and spawned the Sorbara Group.
Edward joined his father’s company in 1968, after earning an MBA. Joseph went into law. With his sister’s husband, he established the Tanzola & Sorbara law firm in 1971, which handled the legal needs of the Sorbara Group.
Greg Sorbara served as an Ontario Liberal MPP from 1985-95 and 2001-12. He held several cabinet posts, was president of the Liberal party, and wasn’t involved in the family business during his time in politics, according to Joseph’s court application. Sam’s daughter, Marcella, never worked in the company.
Joseph joined the company in 1985, when his father’s health was deteriorating. He and Edward were “partners of equal weight” and co-CEOs.
“Not only did they have the final say on every significant decision that affected the Sorbara Group, but their historical practice has been to make all such decisions together,” Joseph’s court application says. The two brothers, it adds, “signed all cheques together.”
In his statement to the Star, Greg Sorbara agrees: “From 1989 until 2015 Joseph and Edward served as co-CEOs. No substantive decisions were made nor initiatives undertaken in the absence of agreement between the two of them.”
The company had no formal corporate governing structure. There was no protocol for calling or conducting meetings and no shareholder agreement that defined the business relationship between the siblings, Joseph maintains.
“Instead, governance depended on the ability of Joseph and Edward to do business together,” his application states. “Disagreements had to be resolved and compromises reached, otherwise, as equal partners, the Sorbara Group could not function.”
In the mid-1990s Joseph and Edward consulted PricewaterhouseCoopers about succession planning. The brothers “wanted to ensure that a process was in place for the business to be transferred to the next generation of the Sorbara family,” Joseph’s court document says.
Joseph, who once chaired the York University Development Corp., was close to retirement. He says he wanted someone from his immediate family to take over his role in the company, thereby ensuring that his children and grandchildren “would be looked after.”
In February 2003, Joseph’s son, Paul, a lawyer with an executive MBA from U of T’s Rotman School of Management, joined the company. Joseph wanted Paul to succeed him as co-CEO, but Edward allegedly had other designs.
“Edward has unilaterally promoted certain third generation family members without Joseph’s consent and appears intent to continue to do so in complete disregard to Joseph’s opposition to these practices,” Joseph’s court application says.
Joseph does not want his interests in the company overseen by people “that have been appointed without his consent,” it adds.
With the extended family growing, Greg Sorbara proposed an advisory board to deal with governance and succession. It was made up of the four siblings and a member from each of their families. Greg became the board’s chair and Joseph appointed Paul as his family representative.
In the meantime, Joseph and Edward clashed over the company’s direction. Joseph opposed “Edward’s insistence on investing nearly all income and capital generated by rental properties in development projects that were not generating adequate financial returns” and were poorly managed, his application claims.
The brothers couldn’t agree on whether the company should focus on pursuing income from rental properties and diversifying investment or doubling down on investing in land for housing and condos, it adds.
Joseph claims Edward increasingly left him out of project decisions while refusing to provide adequate information on the company’s financial performance.
In his statement to the Star, Greg Sorbara said the company’s chief financial officers always reported directly to Joseph and Edward. And the company’s auditors “have never identified inaccurate or inadequate financial reporting.”
Joseph’s application to the court describes the company’s finances as “opaque and in some circumstances inaccurate.” It states that between 2010 and 2014, the company spent about $233 million on “development activities but had no clear assessment of what profits had been made or how the projects were performing from a cost, timing and value perspective.”
“Even based on the financial data available, it is apparent that the Sorbara Group is not being run in a prudent and businesslike manner,” Joseph’s court application claims.
It cites the example of the company’s planning, marketing and sales division, which Joseph claims “created a $14 million operating deficit.” Rather than address “this failed business model,” Joseph adds, the Sorbara Group has been using loans from its banking entity, Antica, to fund the deficit.
“It appears that, through Edward’s now-unilateral directions, monies are being taken out of the Sorbara Group’s profitable business ventures and used to fund an ever-increasing deficit,” Joseph’s court request alleges.
Joseph also accuses Greg Sorbara of attempting to “entrench himself as chairman” of the advisory board while blocking any succession planning and the setting up of a governance structure.
His application to the court calls the firing of his son “capricious” and says it fuelled Joseph’s “marginalization” in the company. It insists there’s no way for Joseph to ensure that his 25-per-cent interest in the company is being properly managed.
A formal mediation process, started in March 2016, failed to bring peace. Joseph then had a severe stroke, followed by what his application describes as Edward’s poisoned email to the extended family.
“Notwithstanding the litigation we wish only the very best for Joseph and his family,” Greg Sorbara says in his statement. “He and his family continue to share the full benefit of their stake in our business.”
There is no evidence that Joseph is having a change of heart. He accuses Edward of running the Sorbara Group “as if it was his own private group of companies” and of “depleting” its value. He estimates the company’s assets at $1.4 billion, wants his siblings to buy him out, and asks the court to appoint an inspector to determine the fair value of his share.
Barring that, Joseph wants the court to order that the company his father built to be dissolved.
Sandro Contenta is a reporter and feature writer based in Toronto. Follow him on Twitter: @scontenta