A lawsuit filed by a former top official with a luxury condo developer in Toronto is seeking nearly $50 million in damages against the firm, claiming the company founder made “significant misrepresentations to its lenders” as part of a “cash crisis” that led to her wrongful dismissal.
In response, the company and its founder have denied the founder made misrepresentations and filed a countersuit against the former official, alleging, among other things, breach of contract, mismanagement and defamation.
Claims by either suit have not been tested in court.
Maria Athanasoulis, 42, former chief operating officer and Cresford Developments’ most senior employee aside from founder Daniel Casey, filed a statement of claim last month with the Ontario Superior Court of Justice in Toronto, saying she was recently terminated after she “insisted that Mr. Casey deal honestly with Cresford’s stakeholders.”
Casey, the court filings say, stripped Athanasoulis of her responsibilities and she was constructively terminated after she “pressed” Casey to make the equity investments he was contractually required to make.
Rather than making the proper equity investments, Casey had “secret loans” in which he borrowed high-interest funds from third-party lender OTB Capital, the lawsuit claims.
In their statement of defence, Casey and Cresford deny there was anything unusual about the way Cresford raised equity investment for the projects, adding “at all times Casey provided full disclosure to lenders.”
“At all times Athanasoulis was aware of the manner in which Cresford raised its equity requirements for the projects,” the filing goes on to say.
Athanasoulis’s suit claims that several active Cresford condo projects in Toronto are facing financial challenges as a result of Casey’s decisions, including Clover, a 44-storey condo tower near Yonge and Bloor streets; Halo, a 38-storey building between Wellesley and Carlton streets; 33 Yorkville, a 64-storey and 41-storey condominium; and YSL, an 85-storey condo tower at Yonge and Gerrard streets.
Projects including Clover, Halo and 33 Yorkville face a cash shortfall of $150 million, the suit says.
In order to finish the projects Cresford must “meet its obligations to lenders, contractors and other stakeholders. This requires access to funding that Cresford does not currently have,” the suit says.
Aside from nearly $50 million in profits, the claimant is also seeking $1 million for wrongful dismissal.
In their statement of defence and counterclaim, Casey and Cresford seek $17.5 million against Athanasoulis, alleging among other things, breach of contract, breach of fiduciary duty, mismanagement and a yet-to-be disclosed amount for defamation of Casey.
In breaching her fiduciary duty to Cresford and Casey, Athanasoulis “intended to create a situation that would force Casey to sell Cresford assets at liquidation value” to a potential purchaser of her choice, the court filing says.
Rather than Casey being the sole person in control of all the key financial decisions of the company, Athanasoulis as COO was closely intertwined with Cresford’s financial machinations, the countersuit says.
For instance, since August 2017, Athanasoulis continued to play a “key role” in securing equity investments required for the 33 Yorkville and YSL projects and was “therefore familiar with the equity requirements and source of funds being applied to meet the equity requirements of the lenders,” the countersuit says.
The countersuit says Athanasoulis wasn’t constructively dismissed, but resigned from Cresford Jan. 2 this year after threatening to do so if an agreement to sell the company to the purchaser wasn’t reached. By resigning she carried out the threat, the countersuit says.
Cresford, a 40-year-old company, has made a name for itself as a luxury condominium brand, generating revenues in excess of $2.5 billion in the past five years alone, says Athanasoulis’s statement of claim, filed last month in the Ontario Superior Court of Justice.
Athanasoulis says in her claim that Casey repeatedly said he had access to “significant funds” and she believed he would use some of his wealth to solve the company’s cash problems.
But last summer Casey told Athanasoulis that he had substantial mortgages registered against his cottage and his home, that he required between $4 million and $5 million a year to maintain his lifestyle, the statement of claim says.
The court filing goes on to say that in February 2019, when Cresford was “desperate for cash,” Casey spent about $750,000 to buy a house for his son — money, Athanasoulis says in her claim, that should have been used to pay creditors.
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But the countersuit says that when Cresford moved to a new office near Yonge Street, south of Bloor Street, Athanasoulis as COO directed the purchase of furniture and decor items worth about $400,000, including a $40,000 mirror.
“Once again there was no suggestion from Athanasoulis of any impending financial difficulties,” the suit says.
Around last August, Athanasoulis told Casey there were financial issues the company faced that needed to be dealt with, “but Cresford, based on her analysis, would have about a year to resolve those issues,” the countersuit says.