Giuseppe Strazzeri v. Superintendent of Financial Services, 2012 ONFST 6

FINANCIAL SERVICES TRIBUNAL

2012 ONFST 6

Decision No. M0448-2010-1

Date: 2012/03/29

IN THE MATTER OF the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29 (the “Act”), in particular sections 19(1) and 21, and the Mortgage Brokers and Agents Licensing Regulation, O. Reg. 409/07, in particular section 10;

AND IN THE MATTER OF the Notice of Proposal of the Superintendent of Financial Services dated October 13, 2010, to revoke the mortgage agent’s licence of Mr. Giuseppe Strazzeri;

AND IN THE MATTER OF a Request for Hearing filed by Mr. Strazzeri on October 21, 2010, pursuant to subsection 21(3) of the Act.

BETWEEN:

GIUSEPPE STRAZZERI

Applicant

• and -

SUPERINTENDENT OF FINANCIAL SERVICES

Respondent

BEFORE:

Mr. Denis Boivin, Member of the Tribunal and Chair of the Hearing

Mr. Shiraz Bharmal, Member of the Tribunal and Member of the Panel

Ms. Heather Gavin, Member of the Tribunal and Member of the Panel

APPEARANCES:

Ms. Maria Louisa Diaz, representing the Applicant

Mr. Robert Conway, representing the Respondent

HEARD:

December 12, 13 and 14, 2011

REASONS FOR DECISION

A. INTRODUCTION

1This hearing was requested Mr. Giuseppe Strazzeri pursuant to subsection 21(3) of the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29 (the “Act”). Mr. Strazzeri is licensed as a mortgage agent and is the subject of a Notice of Proposal issued by a delegate of the Superintendent on October 13, 2010 (the “NOP”). The Superintendent proposes to revoke the licence of Mr. Strazzeri on the basis of past conduct that occurred between 2002 and 2004.

2This case is unique in many respects. First, Mr. Strazzeri was never convicted of any offence in relation to the conduct relied upon by the Superintendent and there are no pending criminal proceedings with respect to this conduct. Second, in the NOP, there is no allegation that Mr. Strazzeri contravened or failed to comply with any requirement established under the Act or its regulations. The past conduct in question occurred at a time when mortgage agents were not required to be licensed, well before July 1, 2008. Third, there is no allegation before the Tribunal that Mr. Strazzeri failed to disclose anything in his application to become a mortgage agent.

3In essence, the Tribunal must determine whether the past conduct established by the Superintendent, during the hearing, provides reasonable grounds to believe that Mr. Strazzeri is no longer suitable to be licensed as a mortgage agent.

B. STATUTORY FRAMEWORK

4The authority to revoke the licence of a mortgage agent is found in section 19 of the Act. Pursuant to subsection 19(1), the Superintendent has the discretion to revoke a licence in any of the circumstances in which he is authorised to suspend a licence under subsection 18(1)(a), (b), (c) or (d). For present purposes, the relevant ground is described as follows in subsection (b): “if the Superintendent believes, on reasonable grounds, that the licensee is no longer suitable to be licensed having regard to the circumstances, if any, prescribed for the purposes of subsection 14(1) or 16(4), as the case may be, and such other matters as the Superintendent considers appropriate”.

5The circumstances referred to in subsection 18(1)(b) of the Act are found in section 10 of Ontario Regulation 409/07 (the “Regulation”). There are three prescribed circumstances, but only the first paragraph is relevant to this hearing: “Whether [an] individual’s past conduct affords reasonable grounds for belief that he or she will not deal or trade in mortgages in accordance with the law and with integrity and honesty”.

6The reasons attached to the NOP allege that Mr. Strazzeri’s conduct between August 2002 and October 2004 shows a “pattern of dishonesty” that renders him unsuitable to be licensed. Regrettably, these reasons do not mention the specific statutory authority relied upon by the Superintendent to revoke the Applicant’s licence, and counsel for the Superintendent did not provide one during his submissions. However, based on the allegation made against Mr. Strazzeri, it seems clear that the Superintendent is relying on section 10.1 of Ontario Regulation 409/07 to justify his decision.

7According to subsection 21(4) of the Act, when someone requests a hearing before the Tribunal in order to contest a proposal to revoke his or her licence, the Tribunal has the authority to “direct the Superintendent to carry out the proposal, with or without changes, or substitute its opinion for that of the Superintendent” and “may impose such conditions as it considers appropriate in the circumstances”.

C. ISSUES

8The primary issue is whether the past conduct of Mr. Strazzeri, as established during the hearing, affords reasonable grounds to believe that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty. If the Tribunal is satisfied that Mr. Strazzeri remains suitable to be licensed, a secondary issue arises: should any conditions be attached to his licence?

D. EVIDENCE

9The parties did not submit an Agreed Statement of Facts in this matter, but counsel for the Superintendent filed a Book of Documents (the “BD” – Exhibit A) with the consent of Mr. Strazzeri’s representative. The BD contains 122 tabs. Tabs 8 and 108 had previously been removed, at the request of Ms. Diaz, and the Tribunal was asked to disregard Tabs 75-107, because the witness who could attest to these documents could not be found. Over the course of three days, the Tribunal received testimony under oath from eight witnesses: three former clients of the Applicant, a former investigator with the Financial Services Commission of Ontario (“FSCO”), the Applicant, and three character witnesses testifying on his behalf.

1) The Clients

10The case of the Superintendent rests primarily on the testimony of three former clients of the Applicant: A.G., W.W. and J.D.W. The events that these witnesses testified about occurred between August 2002 and October 2004. Their recollection of the details surrounding these events was not always clear. Indeed, there were gaps in the testimony of these three witnesses, especially in the case of the first. However, many of the documents in the BD speak for themselves and they allowed the Tribunal to get a clearer understanding of what actually transpired during this period. What follows is a summary of the relevant parts of their testimony, as supplemented by the documentary evidence contained in the BD.

a) A.G.

11A.G. was 57 years old when she met the Applicant for the first time. Prior to this meeting, the company for whom A.G. had worked for twenty-three years (Symcor Services Inc.) had given her a notice of termination and she was asked to choose the manner in which her accumulated pension benefits ought to be paid. In essence, she had been given two options by Symcor: to receive a monthly benefit of $675.40 or to have the sum of $102,213.69 (the value of her pension on November 1, 2002) transferred to a locked-in arrangement [Tab 11]. According to her own testimony, she chose the second option because she wanted a “bigger return” than the proposed monthly benefits. With this objective in mind, A.G. met the Applicant on the recommendation of a friend of her common law spouse.

12There are a number of documents suggesting that A.G. met with someone from W.H. Stuart & Associates on or about November 5, 2002, in order to open an RRSP account [Tabs 12-17]. She denied meeting anyone from this firm, and does not know the role (if any) played by them in the investment of her pension, but she did recognize her signature on the documents in question. In particular, there is a “Financial Needs Analysis & Asset Allocation Survey” that suggests that A.G. is “Very Aggressive” in terms of her level or risk tolerance – the highest category on the form [Tab 15]. The witness reviewed this document on the stand and noted many discrepancies between the answers given on the form and her own appreciation of the questions being posed. She testified that only the signature was hers and that the answers “do not reflect me”. In addition, A.G. testified that she never received anything more from W.H. Stuart after signing these documents.

13A.G. testified about the substance of her discussions with the Applicant in very general terms. She was not sure when their first meeting occurred, but the documents suggest that they met in November or December of 2002. She recalls meeting him at the offices of CAS Consulting & Investments and discussing the returns she would earn on her investment. According to her testimony, she was told by Mr. Strazzeri that her funds would have to be locked-in for a period of five years, that many different companies would be involved in the investment, including the Heritage Trust Company (“Heritage Trust”) of Charlottetown, P.E.I., and that she would earn an annual return of 24% on her investment or 2% per month.

14On December 6, 2002, the witness A.G. signed the Election Form that she had received from Symcor, indicating her choice to transfer her accumulated pension into a Registered Retirement Savings Plan (RRSP) [Tab 19]. The Applicant’s name and signature are also on this form, as witness to her signature. The same day, A.G. signed an Authorization Form that allowed her pension funds to be transferred from Symcor to Heritage Trust [Tab 22] and signed a Self-Directed RSP Application with Heritage Trust [Tab 23]. On December 13, 2002, A.G. signed a form provided by Symcor entitled “Declaration of Transfer of Funds to a Locked-in RRSP” naming Heritage Trust as the financial institution in charge of the plan [Tab 24]. This form states that “No transfer of funds will be made before this form is fully completed.”

15According to a statement from Heritage Trust regarding the account of A.G., the sum of $103,781.77 was deposited with them on March 6, 2003 [Tab 29]. Presumably, this was the value of her pension with Symcor on the date of the transfer. On the same day, Heritage Trust withdrew the sums of $13.13 (“Fedex”), $8.04 (“Purolator”) and $642 (“RRSP fee 2003-3004”) from A.G.’s trust account, in accordance with an Authorization & Declaration signed by A.G. [Tab 27], and they used the balance of $103,118.60 in her account to purchase 23,330 shares of Kenartha Oil and Gas Company (“Kenartha”), also in accordance with an Authorization & Declaration signed by A.G. [Tab 28]. According to her testimony, A.G. was told by the Applicant that Kenartha was an oil company located in the West Indies and that it was a safe investment. The certificate given to A.G. is dated March 6, 2003, and states that “the shares represented by this certificate are transferable by Heritage Trust Company” [Tab 30].

16On March 12, 2003, six days after A.G.’s pension funds had been transferred from Symcor and converted into Kenartha shares, Heritage Trust paid the sum of $103,118.60 to A.G. by way of cheque [Tab 31]. In her testimony, A.G. did not remember anything about this cheque. However, the statement of her trust account with Heritage Trust clearly shows a share balance of “0” and a cash balance of “0” as of March 12, 2003, and a withdrawal of $103,118.60. Accordingly, as of this day, the witness A.G. did not have any more funds locked-in with Heritage Trust. During her testimony, A.G. made a number of references to her Kenartha shares. For example, she says that she made inquiries with her former employer and learned that her share certificate was worthless. However, in reality, her Kenartha shares were non-existent; they had been converted into cash less than a week after their initial purchase. (Even Heritage Trust seemed to operate under this false assumption, as they sent press releases to A.G. regarding her so-called shares in Kenartha in February and March of 2007 [Tabs 52, 54 and 58] and an invoice for $954 on January 26, 2007 for unpaid trustee fees [Tab 53].)

17On March 13, 2003, A.G. deposited the cheque for $103,118.60 CAD in her bank account [Tab 67]. On the same day, a Toronto-Dominion bank draft in the amount of $68,860.50 US and payable to “APG” was obtained by the witness A.G. and was handed over to the Applicant [Tabs 36 and 67]. She testified that she met Mr. Strazzeri at the bank and gave him the “cheque”. She did not recall what “APG” stood for, but assumed that it had something to do with unlocking her pension funds. There is no documentary evidence about the precise exchange rate used by the bank on March 13th, but there is no allegation that any funds were left once the conversion had been made.

18On or about April 30, 2003, the sum of $37,463 US was deposited with the LFG Group, bearing a West Indies address [Tab 37]. The signature of the Applicant, Mr. Strazzeri, appears on the Certificate of Deposit and personal information about A.G. is included under the heading “Client Information”. According to the Certificate, the deposit was a five-year renewable term deposit with an interest of 24% per annum. On the last page of the Certificate, the following instruction appears: “Interest to automatically be withdrawn on anniversary date, commencing May 01 2004”.

19A bank draft in the amount of $68,860.50 US was handed to the Applicant on March 18th, but only $37,463 US was deposited in A.G.’s account with LFG on April 30th. According to the witness and to handwritten notes made by her in March of 2003, two major deductions account for the difference between these amounts: (1) $13,772.10 US or 20% was paid to Mr. Strazzeri to cover his professional fees and (2) the balance was used to cover a number of A.G.’s personal debts [Tabs 33, 34 and 47]. In the documentary evidence, there are four cheques made by CAS Consulting & Investments in the amounts of $2,384.11 CAD [Tab 26], $6,255.30 CAD [Tab 32], $2,000 CAD [Tab 38] and $819.98 [Tab 38]. The witness testified that she had approached Mr. Strazzeri for financial assistance, prior to the funds being deposited in the LFG Group account, and that he had agreed to pay a number of her debts. In cross-examination, she agreed that the Applicant did not have to advance her any of these funds, but willingly did.

20A.G. received monthly statements from the LFG Group between May 31, 2003 and March 31, 2005 [Tab 40]. The first statement indicates an opening balance of $37,464 US dollars. Each statement shows a monthly return of 2% and monthly earnings of $749.28 and states that “LFG Group S.A. is a manager of a private fund and is not available to residents of Canada and the United States.” On the first three statements, the anniversary year is 2004. However, commencing with the August 2003 statement, the anniversary date is April 30, 2008. According to the testimony of A.G., she wanted a one-year investment at first, but the Applicant had told her that the funds had to be locked-in for five years.

21The statement of April 30, 2004, shows “Disbursements” of $8,991.36 US (the interest earned during the previous year) and a closing balance of $37,464 US. The witness borrowed $3,000 CAD from the Applicant on February 10, 2004, and agreed to repay $3,120 CAD on April 30, 2004 [Tabs 41 and 42]. An email from Mr. Strazzeri states that this loan was repaid in full [Tab 48], presumably with the help of these disbursements. In two letters, A.G. states that she received investment income on or about May 1, 2004 [Tabs 47 and 51], but there is no evidence with respect to the exact amount received by her. It is reasonable to assume that she received the difference between $8,991.36 US and her loan of $3,120 CAD.

22The last statement received by A.G. is dated March 31, 2005. It shows a closing balance of $45,706.08 US. She did not receive any statements after this date or any payments from this balance. On May 27, 2005, she wrote a letter to the Applicant that includes the following [Tab 44]:

It is a month since the interest on my Investment is due and payable, despite several conversations and meetings with you there is no positive word from you as to date for me to receive same. I cannot wait any longer and feel that something is seriously wrong that you are not telling me. I have to get my money by Monday 30th May/05 or else I will be forced to take steps to recover my funds.

If everything is okay I cannot understand why you cannot give me the interest due to me by contract immediately. I have been very patient and agreeable despite certain red flags over the past two years since this was initiated at considerable cost to me.

23A.G. testified that the Applicant never hid his whereabouts from her and that she had many conversations with him regarding her investment. He met with her, answered her calls and cooperated with her. However, he did not account for any of the funds that were shown on the LFG Group statement of March 31, 2005, other than to suggest that he was looking into the matter, that the situation would be fixed in due course, and that he also had money at stake. According to her testimony, the Applicant did not mention the name David Braganza during any of their conversations.

24A.G. consulted a lawyer named Cory Mills in the Spring of 2006. In a letter dated April 10, 2006, she tells Mr. Mills that the Applicant “says some ‘gentleman’ has taken off and no one can find him and he is the person in charge of the investment” [Tab 47]. According to A.G., she subsequently learned from Mr. Mills the name of the gentleman in question: David Braganza. She testified that she never heard of him before and had never authorised the Applicant to invest her funds with him.

25Mr. Mills sent a demand letter to Mr. Strazzeri and he replied by email on May 19, 2006 [Tab 48]. In this response, the Applicant states that A.G. “has no monies invested with CAS Consulting and Investments Ltd or myself” and adds that an investigation is pending with a number of organisations, including FSCO and the Ontario Provincial Police. With this email, the Applicant attached two letters that were addressed to him: one from FSCO dated November 28, 2005 [Tab 45] and one from a lawyer named Michael Krylov dated March 24, 2006 [Tab 46]. In essence, the FSCO letter states that David Braganza faces $8 million in claims from depositors or investors, that he has no significant assets of value, and that a major forensic accounting audit would be required to determine what happened to the money he received from depositors or investors, since “funds were invested off shore through ‘handshake’ deals” with “no paperwork to support the investments”. The letter from Mr. Krylov asks the Applicant and other investors whether they are prepared to participate in a class action against David Braganza. The letter asks each participant for a money retainer of $500 plus an undertaking to cover additional expenses.

26On June 6, 2006, Mr. Mills wrote again to the Applicant. He offered to settle the dispute between A.G. and Mr. Strazzeri for the amount of $50,000, payable in ten monthly instalments of $5,000 [Tabs 49 and 50]. There is no evidence that Mr. Strazzeri responded to this offer. A.G. testified that she received the letters attached to the email of May 19th, but did not participate in the proposed class action against David Braganza because she did not have the necessary funds.

27Instead, A.G. wrote to the Ontario Securities Commission (the “OSC”) on July 19, 2006, outlining her involvement with the Applicant and asking this agency to intervene on her behalf [Tab 51]. On the recommendation of the OSC [Tab 62], she subsequently wrote to FSCO on August 8, 2006, and asked them to conduct a regulatory review with respect to Mr. Strazzeri [Tab 64]. On August 25, 2006, a Senior Manager of FSCO’s Licensing and Market Conduct Division responded to A.G.’s request [Tab 65]. In his letter, Mr. Andrews notes that the Applicant is a mortgage agent authorised to deal in mortgages on behalf of the Mortgage Centre, but that FSCO does not licence or register mortgage agents: “Mortgage agents are the responsibility of the mortgage broker.” In reference to her lost investment, he adds that “[t]he transactions in question do not appear to have relation to any mortgage broker activities and would not fall within the jurisdiction of the Mortgage Brokers Act”.

28A.G. testified that she encountered difficulties with the Canada Revenue Agency (the “CRA”) regarding the investment of her pension funds. The CRA claimed that she owed approximately $40,000 in taxes because she had “broken” her pension. A.G. wrote to the CRA, explained her situation, and the agency “forgave” her [Tab 57].

b) W.W.

29On January 8, 2004, the second witness (W.W.) and his ex-wife (L.W.) deposited the sums of $45,000 CAD and $75,000 CAD, respectively, with the LFG Group [Tabs 72 and 74B]. According to his testimony, W.W. understood LFG to be an investment group named after three individuals, Lorenzo Zuccaro (the person who introduced W.W. to the Applicant), Frank Comisso and Giussepe Strazzeri. The signature of Mr. Strazzeri appears on each “Certificate of Deposit” and personal information about W.W. and L.W. are included under the heading “Client Information”. According to these certificates, the deposits were one-year renewable term deposits with an interest of 20% per annum (24% in the case of W.W.), payable every 4 months. In the BD, there is a $75,000 CAD bank draft from L.W. to a Delaware company called Milestone Developments LLC [Tab 73] along with a receipt from Milestone Developments LLC signed by the Applicant himself [Tab 74]. Under this signature, it is written “It’s been a pleasure working with you!”

30On the basis of representations made by Mr. Strazzeri, W.W. was under the impression that the funds advanced by his ex-wife and himself would be invested in a mortgage loan with a resident of the province of Quebec who needed funds. Most of the discussions regarding this opportunity occurred between W.W. and the Applicant. In fact, the witness himself talked his ex-wife into making the investment, because it looked like a good and reasonably safe opportunity; “backed-up with real estate”. They funded the investment through the sale of their home.

31W.W. testified that he received a few interest payments, but was then told by the Applicant that the Quebec resident to whom the $120,000 CAD had been advanced had encountered problems with Revenue Canada. Apparently, his income had been frozen and he was unable to make his mortgage payments. The BD contains a copy of two cheques from CAS Consulting and Investments to W.W. for a total of $7,000 and one to L.W. in the amount of $5,000 [Tabs 74C-E]. One cheque is dated March 25, 2004, and the other two are dated August 12, 2004.

32W.W. never learned what happened to the Quebec resident and, to this day, has no idea where his money was actually invested. He asked the Applicant to look into the matter on a few occasions, and was assured by Mr. Strazzeri that he was doing everything he could. The witness trusted the Applicant and considered him as a friend – they had lunch together and were both at an investment conference in Mexico in 2002 or 2003. He felt that Mr. Strazzeri was being honest at the time. In fact, W.W. did not question the Applicant’s honesty until he was approached by an inspector with FSCO, in 2008 or 2009, and was informed that their funds had not been invested in a mortgage loan.

33In cross-examination, W.W. was shown a certified copy of a deed of loan dated January 19, 2004, in the amount of $250,000, between CAS Consulting and Investments (described as the “lender”) and Mr. Nicola Carlucci (described as the “borrower”), a resident of Laval, Quebec [Tab 74A]. The witness could not say whether or not this was the investment that had been proposed by the Applicant; in fact, he had no information whatsoever regarding this document. However, it must be noted that a number of other documents are attached to this deed, including a Statement of Account for Milestone Developments showing that the sum of $120,000 was deposited on January 12, 2004, and that two bank drafts were withdrawn from this account on January 19th, each in the amount of $60,006.50 (transaction numbers 20625057 and 20625058) [Tab 74A]. There is also a Transaction Record slip showing that these bank drafts were made payable to Mr. Nicolas Carlucci, each in the amount of $60,000.

c) J.D.W.

34In February or March of 2002, J.D.W. and her late husband (A.D.W.) attended an investment conference in Mexico. She was retired and approximately 61 years of age. Her husband was semi-retired. They owned a home in Bradford, Ontario, with a mortgage of approximately $30,000. They attended a number of seminars and decided to make an investment upon their return. They met the Applicant sometime after this trip, through their accountant Frank Comisso. The witness could not recall how many times they met with the Applicant, or whether they met with him alone or in the company of Frank Comisso, but her memory was crystal clear on the following: the Applicant came up with the strategy of refinancing their home in order to obtain the capital required for their investment. Indeed, she repeated this point during her cross-examination.

35J.D.W. and her husband obtained a mortgage loan in the amount of $149,500 from the National Bank of Canada in December of 2002 [Tab 109]. The Funds Summary for this mortgage shows that the amount of $30,663.70 would be used to discharge their previous mortgage, the sum of $2,461 would be paid to CAS Consulting & Investments as a consulting fee, and that the couple would receive the balance of $112,827.20 upon closing the loan [Tab 110]. The consulting fee is also evidenced by a “Service Contract” signed by J.D.W. and her husband (the “Client”) and the Applicant himself, in the name of CAS Consulting & Investments [Tab 117].

36On or about January 31, 2003, the sum of $110,000 CAD was deposited with the LFG Group [Tab 112]. The signature of the Applicant, Mr. Strazzeri, appears on the Certificate of Deposit and personal information about J.D.W. and A.D.W. is included under the heading “Client Information”. According to the Certificate, the deposit was a five-year renewable term deposit with an interest of 18% per annum. On February 3, 2003, the Applicant wrote to J.D.W. and her husband under the letterhead of CAS Consulting & Investments and said the following: “enclosed for your records please find a copy of the contract you signed with LFG Group S.A.” [Tab 114]. Immediately under his signature appears “LFG Group S.A.”.

37On or about March 1, 2003, an additional sum of $68,000 CAD was deposited with the LFG Group [Tab 113]. J.D.W. testified that these funds were obtained by cashing-in their RRSPs, but she could not recall whether the Applicant had provided any advice in this respect. She testified that they paid a lot of taxes to the Canadian Revenue Agency because of this. Once again, the signature of Mr. Strazzeri is on the Certificate of Deposit and personal information about J.D.W. and A.D.W. is included under the heading “Client Information”. Once again, the deposit was a five-year renewable term deposit with an interest of 18% per annum. On March 3, 2003, the Applicant sent to J.D.W. and her husband a copy of the “contract [they] signed with LFG Group S.A.” under the letterhead of CAS Consulting and Investments [Tab 116]. The title “Financial Strategist” appears immediately below his signature. Moreover, in the last paragraph of his letter, he says the following:

I trust that everything is to your satisfaction, and I look forward to continuing a working relationship, assisting you with any future investments [sic] needs. If you have any questions or concerns, please feel free to contact me at your convenience.

38According to her testimony, J.D.W. and her husband were under the impression that their funds would be safe on the basis of their discussions with the Applicant. She said that Mr. Strazzeri had not informed them of any particular risks, either during the first deposit or during the second. She was present during most meetings, but added that her husband had played a more active role in these discussions. With both investments, J.D.W. went along with the opinion of her husband. In her words, “if it was good with my husband, it was good with me.” During her interview with an investigator of FSCO, the other witness for the Superintendent, J.D.W. was shown a document signed by her husband that suggests that the amount of $110,000 CAD was wired to David Braganza on or about January 30, 2003 [Tab 111]. She was also shown a document from LFG Group with the wiring coordinates of David Braganza [Tab 115].

39J.D.W. and her husband received monthly statements from the LFG Group between February 28, 2003 and March 31, 2005 [Tab 121]. The first statement indicates an opening balance of $110,000 and says that “all funds are in US dollars” – a mistake that was not corrected until the statement of January 31, 2004. The statement also says that “LFG Group S.A. is a manager of a private fund and is not available to residents of Canada and the United States.” Each statement shows a monthly return of 1.5% and the monthly earnings that correspond to this rate. On the first six statements, the anniversary year is February 1, 2004. According to the witness, this is when they were supposed to receive their interest payments. However, commencing with the August 2003 statement, the anniversary date is changed to February 1, 2008.

40The statement of March 31, 2003, shows that new funds of $68,000 were added to the account of J.D.W. and her husband. (These were the RRSP funds.) The statements of February 28 and March 31, 2004, show “Disbursements” in the amounts of $19,800 CAD and $12,240 CAD respectively. Likewise, the statements of February 29 and March 31, 2005, show “Disbursements” in the amounts of $19,800 CAD and $12,240 CAD respectively. The BD contains a receipt from CAS Consulting & Investments for each of these four payments [Tabs 118-120].

41The last statement received by J.D.W. and her husband is dated March 31, 2005. It shows a closing balance of $182,320. The couple did not receive any statements after this date or any payments from this balance. In all, they received payments totalling $64,080 for their investments. According to the testimony of J.D.W., her husband began questioning the Applicant in March of 2006 regarding their interest payments, or lack thereof. She testified that they learned, directly from him, that their money was gone; that David Braganza had taken the money and had run off with it. The Applicant told them that efforts were being made to locate Mr. Braganza, but neither A.D.W. nor J.D.W. did any follow-up with the Applicant after receiving this news, despite the fact that he was always accommodating. “We accepted it and moved on.” In her words, A.D.W. was not the fighting kind, and neither was she. Sadly, A.D.W. passed-away in November of 2007.

2) The Investigator

42The fourth and final witness called by counsel for the Superintendent was Harry McClenaghan, a retired investigator with FSCO with more than twenty years of experience. On July 14, 2008, Mr. McClenaghan was asked to investigate the suitability of the Applicant to be licensed under the Act in light of answers that he had provided on his application. The answers related to an accusation of criminal fraud over $5,000, a charge that was eventually stayed and is not before the Tribunal. However, in the context of his investigation, Mr. McClenaghan interviewed the Applicant on two separate occasions – in February and November of 2009. During these interviews, the witness obtained information with respect to David Braganza and to the investments made by A.G., W.W. and J.D.W.

43Over the objection of Ms. Diaz, the witness was permitted to refer to the transcripts of his interviews with the Applicant in order to refresh his memory on the witness stand. However, the transcripts themselves were not introduced into evidence in order to establish the truth of their contents. Moreover, much of the testimony that was given by Mr. McClenaghan related to matters that he had personally witnessed on other occasions, and not to answers that were given by the Applicant during these interviews.

44Mr. McClenaghan interviewed A.G. before meeting with the Applicant. The witness knew about her, because she had written to FSCO in August of 2006 [Tab 64]. During this meeting, she gave him many documents and an account of her involvement with the Applicant that corresponds to the testimony she gave before the Tribunal. When he interviewed the Applicant, Mr. McClenaghan asked him about A.G.’s funds. He confirmed that the money had been given to David Braganza and that he had no idea how the funds had been invested or used. The witness was told that it was Mr. Braganza’s idea to convert the funds to US dollars. The witness was also told by Mr. Strazzeri that he did not tell A.G. about David Braganza or about where the money was going, because he did not know at the time. With respect to the monthly statements sent by the LFG Group [Tab 40], Mr. McClenaghan was told by the Applicant that he had prepared the statements at the request of Mr. Braganza. Lastly, the witness was told that the alleged $20,000 service fee was not charged by the Applicant, but by Heritage Trust or Kenartha Oil. However, in an email sent to Mr. McClenaghan and dated January 8, 2010, a representative of Heritage Trust confirmed that the only fees charged to A.G.’s account were $642 for trustee fees and $21.17 for Fedex and Purolator expenses [Tab 68].

45Mr. McClenaghan testified that he was given the names of the other two clients by the Applicant himself. Mr. McClenaghan spoke to both J.D.W. and W.W. They gave him accounts of their involvement with the Applicant that correspond to the testimony they gave before the Tribunal. Mr. McClenaghan did not speak to the Applicant about J.D.W. and her husband, but he did discuss W.W. and his ex-wife L.W. According to Mr. McClenaghan, the Applicant said that the couple’s money had also been invested with David Braganza, not in a mortgage.

46In addition, Mr. McClenaghan testified that he had spoken to the Applicant in December of 2006 with respect to David Braganza. At the time, the witness had conducted an investigation about Mr. Braganza, had searched his office and had found a letter from the Applicant asking the return of $1,800,000 in principal and interest. According to his testimony, he left a message with Mr. Strazzeri on September 2, 2006, but did not receive a response until December 21, 2006. They spoke the next day and the Applicant denied any knowledge of this letter. However, on February 16, 2007, Mr. McClenaghan received another call from the Applicant. According to the witness, Mr. Strazzeri said that he was a mortgage agent and that he had made investments with David Braganza, both for himself and for others. Mr. McClenaghan was asked whether he had investigated the Applicant, as a result of these discussions. His answer was “no, because mortgage agents were not regulated at that time” by FSCO.

47During his interviews, Mr. McClenaghan asked the Applicant about the LFG Group and CAS Consulting & Investments. According to the witness, he was told that LFG Group was the Applicant’s own company and that he was the president and director of CAS Consulting & Investments. A Ministry of Consumer and Commercial Relations corporate search dated October 4, 2006, with respect to the LFG Group, shows “Giuseppe Strazzeri” as director and president of this company [Tab 2].

3) The Applicant

48The Applicant began his testimony by saying the following: “according to FSCO, I am a mortgage agent, but I did the courses to be a broker”. He began his career as a mortgage agent on February 8, 2002, and has worked primarily for the Mortgage Centre, under the supervision of a broker. According to him, his business activities have been “strictly focussed” on the mortgage industry since 2005, as a result of a “terrible experience” with investments.

49In 2001, the Applicant became involved in a forum for financial education called Global Prosperity. He attended weekly meetings, was introduced to Lorenzo Zuccaro and Frank Comisso, and the three of them eventually went to Mexico for an investment conference. Mr. Strazzeri attended various seminars at the conference, including one focussing on the liquidation of RRSPs for investment purposes. He met W.W. and L.W. at this conference and they exchanged business cards.

50On his return to Toronto, the Applicant decided to do business with Lorenzo Zuccaro and Frank Comisso. The three of them met with David Braganza and one of his partners. Mr. Braganza had been introduced to the Applicant through Brian Hughes, someone he met at the Mexico conference. In terms of due diligence, the Applicant and his colleagues asked questions to Mr. Braganza, they asked for a list of clients, they conducted research on the Internet, and they questioned some of his clients. They discovered that he had been a broker for approximately 10 years, had never had any issues with regulatory bodies and had a good track record. As a result, the Applicant felt comfortable and did not ask for any supporting documents. He did not know the exact nature of the investments made by David Braganza, but knew they involved margin calls and IPOs (Initial Public Offerings) on the basis of verbal information received from him. With the benefit of hindsight, Mr. Strazzeri admitted during cross-examination that this was a “huge mistake” and that he had “paid for it”, in reference to the funds that his family and himself had personally invested with Mr. Braganza and had subsequently lost. The Applicant also noted that he was fairly new in the business, at the time, and did not have lots of experience.

51In reference to himself, Lorenzo Zuccaro and Frank Comisso, the Applicant testified that they were the “biggest investors” with David Braganza and that the latter did not want to deal with “small individual people”. The Applicant and his family invested approximately $220,000 with Mr. Braganza at first, and then added more money. Lorenzo Zuccaro invested approximately $80,000 and Frank Comisso invested almost $350,000. Lorenzo Zuccaro kept track of all investments manually [Tabs 4-5].

52The Applicant testified about his relationship with A.G. Most of his evidence was consistent with hers, but there were some notable nuances, additions and contradictions. According to his testimony, A.G. approached him in November of 2002 in order to gain access to her RRSPs and to obtain liquid funds. He offered to facilitate this process and explained the procedure that would be involved. She inquired about investments and he offered a return of 18%, but she wanted 24%. The Applicant does not recall mentioning David Braganza to A.G. at the beginning, “but the name did come up at some time”. The pension funds of A.G. ended up with Heritage Trust, a company that the Applicant learned about in Mexico through a man named B.V.. According to him, nobody talked to A.G. about the purchase of Kenartha shares, because it was part of the process involved in liquidating RRSPs. The whole procedure took time and was coordinated by Mr. V. The Applicant confirmed that he personally drove A.G. to her bank (“as a courtesy”), once her cheque from Heritage Trust was ready. However, he claims that he gave the bank draft payable to APG to Mr. V. In addition, Mr. Strazzeri denied receiving a 20% commission for his services. Someone was charging this fee, but it was not him. He testified that Mr. V. had told him about this fee and that he had told A.G. during his discussions with her. The Applicant is not sure how the subsequent transaction occurred, but eventually the funds ended up in his account (less 20%). The Applicant gave some funds to A.G. and the rest to David Braganza.

53The Applicant testified that he personally prepared the LFG Group monthly statements sent to A.G. [Tab 40], using the template provided by David Braganza and the numbers provided by Lorenzo Zuccaro. He confirmed that Mr. Braganza provided interest payments at first, but that “we started seeing low payments sometime on 2005”. He talked regularly to A.G. and kept her informed of the situation, but stopped communicating with her once she got a lawyer. According to his testimony, he gave A.G. the name of David Braganza on “many occasions” and had “many conversations” with her about him.

54The Applicant testified about his relationship with W.W. and his ex-wife L.W. His evidence was consistent with the testimony of W.W. However, contrary to what investigator McClenaghan had told W.W., he adamantly denied that the funds advanced by W.W. and his ex-wife were given to David Braganza. Instead, he said that the money was loaned to Nicola Carlucci and was secured with a mortgage on this person’s property [Tab 74A]. The Applicant testified that he met Mr. Carlucci in advance with Frank Comisso. They appraised the property. He prepared the paper work, hired a lawyer in Montreal and advanced $100,000 of his own money in this transaction.

55The Applicant testified about his relationship with J.D.W. and her late husband A.D.W. Most of his evidence was consistent with hers, but there were some notable nuances in his testimony. According to him, they were Frank Comisso’s clients and he was introduced only when they wanted to take money out of their home for investment purposes. In addition, he testified that he signed the LFG Group documents as a witness, but that Frank completed them. He claims that he was not present during any discussions about the investment of their money. In his words, “I only did the mortgage stuff.” The Applicant testified that the $110,000 was wired directly to David Braganza, but that he was not present – this was done by J.D.W. and A.D.W. with the help of Frank Comisso. Lastly, he testified that he spoke to A.D.W. on many occasions, once the problems with the investment began, because Frank was not always present to answer his queries. He spoke to A.D.W. right until his death in 2007.

56The Applicant testified that he would receive from David Braganza a return of between 3% and 4.75% per month on the investments made with him, including the investments made with the funds provided by A.G., J.D.W. and A.D.W. He said that he was providing a “service” for David Braganza, and that this rate of return could be viewed as a fee or commission. He testified that A.G. did not know about this fee and that the interest would be paid on the anniversary of the investment. When asked how the fee was determined, Mr. Strazzeri said that it was a matter of negotiations between the three of them – the members of the LFG Group – and David Braganza. In his words, “we started at a low rate to try it and we brought in more money and then we asked for more”.

57In early 2005, the Applicant stopped lending money to Mr. Braganza. According to him, there were discussions about Frank Comisso and Lorenzo Zuccaro continuing in exchange for an even higher return, but he did not participate. The Applicant testified that he wanted to pull his money out because the risk had increased and the payments had slowed down. He did not disclose this to his clients: “I was more concerned with getting the money out, and it was not only their money, it was my money and my family’s”.

58The Applicant testified that he went to the residence of David Braganza in early 2005, when the interest payments started slowing down. The two of them also met at coffee shops, in the company of Frank and Lorenzo. In addition, the Applicant would call Mr. Braganza and leave messages for him. Eventually, David Braganza stopped returning calls and disappeared. A group of twenty people got together to discuss the matter, and a lawyer named Michael Krylov suggested bringing a class action against Mr. Braganza [Tab 46]. The Applicant also contacted a sergeant with the Ontario Provincial Police and conducted his own investigation. He testified that David Braganza was eventually located and that he provided his address to FSCO, but nobody did anything.

59The Applicant testified that he moved to Bradford, Ontario, in 1999 and that he has been very involved in the community. He opened a franchise of the Mortgage Centre, has volunteered with the Chamber of Commerce, and started the Bradford Board of Trade. He testified that he has a great relationship with the Mayor and was nominated for the President’s Choice Award, in recognition for the time and commitment he injected in the community. According to his testimony, his mortgage agent’s licence constitutes his sole source of income – “it’s all I do”.

60During cross-examination, counsel for the Superintendent introduced a biography of the Applicant taken from the Internet (Exhibit C). The document was shown to Mr. Strazzeri and he confirmed its authenticity. The document states that the Applicant has been a “Mortgage Broker” with Dominion Lending Centres since 2011 and a “Mortgage Broker” with The Mortgage Centre for the previous ten years. The following text appears under the second entry: “For the past 10 years I have been working in the financial sector studying the International Markets with comparison to the Domestic Markets to help you, the consumer, understand how the financial world works.” At the very bottom of the “Professional experience” page, a third entry appears: “Mortgage Agent, The Mortgage Centre”. The Applicant confirmed that he had applied for a mortgage broker licence, but that his application had not yet been accepted by FSCO. He stated that he has met all the educational requirements to be a mortgage broker.

4) The Character Witnesses

61Three witnesses were called to testify in support of the Applicant’s character: D.F., P.J. and T.S. The first witness is the owner of a company that provides short-term financing to purchasers of homes. He has known Mr. Strazzeri since 2005 or 2006 and has conducted 10-15 transactions with him over the years. According to D.F.’s testimony, the Applicant conducted his due diligence and never brought an application for funding that was turned down. The witness recovered his investments on all transactions and stated “I wish all my leads were Giuseppe leads”. He also testified that Mr. Strazzeri never represented himself as being a broker. In cross-examination, the witness stated that he did not know why he was testifying for the Applicant – “I did not ask, and he did not offer”. He added that it would not change his testimony, if he knew that allegations of dishonesty had been made against Mr. Strazzeri.

62P.J. is a real estate broker with approximately twenty years of experience. Between the years 2004-2009, he also worked as a mortgage broker with a family involved in secondary mortgage transactions. He met the Applicant in this context and they exchanged 15-25 referrals during this period. According to P.J., all loan documents received from the Applicant were in good order (“i’s were dotted and t’s were crossed”) and he was always pleased with him. The witness described Mr. Strazzeri as a good mentor and a good person, and stated that he would gladly work with him again if ever he returned to the mortgage industry. In cross-examination, the witness stated that he did not know the details of the Applicant’s problems with FSCO. He asked him if it had anything to do with their transactions and “he said no, so I didn’t go further”.

63T.S. is a realtor and has done business for approximately ten years. She met the Applicant in 2005 and together they founded the Bradford Board of Trade. She described Mr. Strazzeri as innovative, very involved in his community and her mortgage agent of choice for a number of years. She has conducted 20-30 transactions with him over the last two years and has never encountered any problems. In fact, T.S. gave an example of why she can always count on him – the fact that he changed his plans at the last minute, on a Saturday, in order to accommodate one of her clients. In cross-examination, the witness stated that she knew that there was an investigation underway “because people are not letting things go”, but she did not know the details of the investigation.

E. ANALYSIS

1) Preliminary Observations

64During her closing submissions, counsel for the Applicant relied on four previous decisions of the Tribunal: 1) Ian Douglas Knoll Henderson v. Superintendent of Financial Services (FST Decision No. M0319-2008-1) (Henderson); 2) Justin Edwards v. Superintendent of Financial Services (FST Decision No. M0332-2008-1) (Edwards); 3) Janet Pereira v. Superintendent of Financial Services (FST Decision No. M0407-2009-2) (Pereira); and 4) Patrice De-Ann Gooding v. Superintendent of Financial Services (FST Decision No. M0326-2008-1) (Gooding). These decisions contain a number of general principles that have consistently been applied by the Tribunal in determining the suitability of a person to be licensed as a mortgage agent or broker under the Act. What follows is a summary of three key principles established by them.

65First, suitability hearings held pursuant to section 21 of the Act are de novo hearings. The Tribunal need not show any deference to the Superintendent’s determination with respect to Mr. Strazzeri’s suitability to be licensed as a mortgage agent. Rather, the Tribunal must make its own assessment of suitability having regard to the prescribed circumstances invoked by the Superintendent (section 10.1 of Ontario Regulation 409/07) and the evidence adduced during the hearing. Accordingly, the issue is whether the Tribunal has reasonable grounds to believe that Mr. Strazzeri will not deal or trade in mortgages in accordance with the law and with integrity and honesty, having regard to the past conduct established during the hearing. As observed in Gooding, this is a factual determination that must be made on an individual basis, having regard to the unique circumstances of this particular case (at p. 6).

66Second, in determining the suitability of a person to be licensed as a mortgage agent or broker under the Act, the Tribunal must be mindful of two overriding considerations: 1) the Act and its regulations are designed to protect the public interest and enhance public confidence in the mortgage industry and 2) a decision to refuse to issue a licence under the Act, or to suspend or revoke an existing licence, can have severe financial consequences for the applicant or licensee. Given those serious consequences, a finding of unsuitability must not be made lightly. The quality of evidence required to support such a decision must be “clear, convincing and cogent” – an expression that has surfaced in many disciplinary proceedings and that was incorporated by reference in the Henderson decision (at p. 8).

67Third, in assessing the impact of someone’s past conduct on his or her suitability to be licensed, the Tribunal adopts a contextual approach and considers all relevant circumstances. Nine considerations were identified in the Henderson decision (at p. 9) and have regularly been applied to decide whether someone’s past conduct will likely affect his or her ability to deal or trade in mortgages in accordance with the law and with integrity and honesty, within the meaning of section 10.1 of Ontario Regulation 409/07. However, these factors were never meant to constitute a litmus test of suitability, a standard that must be applied irrespective of the unique circumstances of each particular case. As the Tribunal noted in Henderson (at p. 9), “[t]his list is not meant to be an exhaustive list of considerations nor to suggest that the application of all or any particular number of these considerations must favour the conclusion that the individual should be disqualified from holding a mortgage agent’s licence, on the basis of past conduct, before such a conclusion can be reached” [emphasis added]. The true test is contained in section 10.1 of Ontario Regulation 409/07. The Henderson decision simply provides a general framework for addressing the issue.

2) Past Conduct

68As noted by counsel for the Applicant, there are important differences between the present case and the Henderson line of authorities. First and foremost, Mr. Strazzeri was never convicted of any offence in relation to the past conduct relied upon by the Superintendent in order to revoke his licence and there are no pending criminal proceedings with respect to this conduct. In the cases cited by Ms. Diaz, the Superintendent was relying on actual findings and convictions regarding the past conduct of the applicant. In Henderson, the applicant had been found guilty of professional misconduct by a disciplinary panel of the Law Society of Upper Canada and had lost his licence to practice law. In Edwards, the applicant was found guilty of possession of a controlled substance and was given a five-month conditional sentence (“house arrest”). In Perreira, the applicant was found guilty of fraud over $5,000, was given a twelve-month conditional sentence, and was ordered to pay restitution in the amount of $59,904. In Gooding, the applicant was also found guilty of fraud over $5,000, was given a two-year conditional sentence, and was ordered to pay restitution in the amount of $14,315.

69Furthermore, in Henderson, Edwards, and Perreira, the applicant had provided false information on his licence application with respect to these prior convictions. In each case, the Superintendent had invoked this misrepresentation as an independent ground for denying the applicant’s licence. In the present matter, there is no allegation that Mr. Strazzeri made a false statement or failed to disclose anything in his application to become a mortgage agent. During the hearing, we were told that a FSCO investigation was commenced because of information he provided on his application, but counsel for the Superintendent never argued that the Applicant misled the Superintendent by withholding material information or by giving false or misleading information, within the meaning of section 10.3 of Ontario Regulation 407/07.

70This being said, the absence of a previous contravention, conviction or sanction does not prohibit the Superintendent from invoking section 10.1 of Ontario Regulation 409/07 in order to revoke a licence issued under the Act, nor does it prevent the Tribunal from reaching a conclusion that Mr. Strazzeri is unsuitable to be licensed on the basis of his past conduct. Section 10.1 uses the expression “past conduct” – not “past contravention”, “past conviction” or “past sanction”. Likewise, the absence of a false statement on Mr. Strazzeri’s licence application is not fatal to the Superintendent’s notice of proposal. Section 10 provides three “prescribed circumstances” for the purpose of determining whether an individual is suitable to be licensed as an agent or broker. They can be invoked alone or in any combination, based on the evidence.

71Naturally, in the absence of a prior criminal trial or disciplinary hearing, the Superintendent may have more difficulty proving the past conduct that he is invoking under section 10.1 of Ontario regulation 409/07. There will be no transcripts, guilty pleas, findings or reasons to introduce into evidence. Likewise, before the Tribunal can apply the Henderson analytical framework of suitability, the Tribunal will need to weigh all of the evidence adduced by the parties and make factual determinations as to what past conduct actually took place. However, provided the evidence relied upon is clear, convincing and cogent, there is nothing in the Act or regulations that prevents the Tribunal from concluding that someone is unsuitable to be licensed on the basis of otherwise unpunished past conduct.

3) Past Conduct of the Applicant

72In this matter, the Tribunal heard from eight different witnesses and received many documents in evidence. Although there were some notable inconsistencies, the four witnesses called by the Superintendent and the Applicant gave similar accounts of their relationship with one and another. Some of the differences in their testimony relate to matters of little relevance to the issues before the Tribunal – for example, the matter of whether A.G. insisted on an annual return of 24% or whether the Applicant offered a return of 24%. Some inconsistencies are resolved by the documentary evidence – for example, the Applicant’s assertion that J.D.W. and her late husband A.D.W. were not his clients contradicts his own written words [Tab 116]. However, some inconsistencies remain unresolved – for example, the question of whether the Applicant gave the funds invested by W.W. and his ex-wife L.W. to David Braganza or whether these funds were advanced to another person as part of a mortgage loan.

73In addition, there are many questions that were never answered by any of the witnesses or by the documentary evidence. For example, what were the exact steps involved in liquidating A.G.’s pension funds and who participated in this process? What were the roles played by Heritage Trust, Kenartha and APG in relation to the Applicant? Who deposited A.G.’s funds in the Applicant’s account? How did David Braganza receive these funds? How did he receive the funds deposited by J.D.W. and A.D.W.? How were all of these funds invested by David Braganza? What happened to him?

74In this matter, it is not necessary to resolve all inconsistencies in the testimony of the witnesses or to answer all questions that arise from their evidence. Sufficient facts have been established by clear, convincing and cogent evidence to prove the Applicant’s past conduct and to support a finding of unsuitability. Having reviewed the evidence carefully, the Tribunal makes the following findings of fact with respect to the Applicant’s past conduct:

a. Giuseppe Strazzeri was a founding member of LFG Group S.A. and CAS Consulting & Investments, two corporations that were used by him to make and manage investments. At all relevant times, he was part of the controlling mind of both corporations.

b. Giuseppe Strazzeri provided financial services to A.G., W.W., his ex-wife L.W., J.D.W. and her late husband A.D.W. The nature of these services varied, but they all entrusted money to him for investment purposes and were all his clients. He promised annual returns of 24% to A.G. and W.W., 20% to L.W., and 18% to J.D.W. and A.D.W.

c. On March 13, 2003, A.G. gave a bank draft in the amount of $68,860.50 US to Giuseppe Strazzeri for investment purposes. Of this amount, only $37,463 US was deposited in her account with LFG Group. A fee of $13,772.10 US or 20% was withheld prior to this deposit and payments to A.G. explain the rest of the shortfall. Although A.G. knew in advance about a 20% fee, Giuseppe Strazzeri is unable to account for said fee. Without the knowledge or consent of A.G., Giuseppe Strazzeri transferred her funds to David Braganza. A.G. only recovered $8,991.36 US or 24% of the funds deposited with LFG Group. Giuseppe Strazzeri is unable to account for the balance of the funds entrusted with him, let alone any of the interest payments promised. A.G. lost a total of $28,471.64 US, without taking into account the service fee withheld.

d. On January 8, 2004, W.W. and his ex-wife L.W. deposited $120,000 CAD with the LFG Group for investment purposes. Their funds were combined with $100,000 of the Applicant’s own money and were invested in what appears to be a mortgage loan. W.W. and his ex-wife recovered $13,000 or 10.8% of these funds. Giuseppe Strazzeri is unable to account for the balance, let alone any of the interest payments promised. W.W. and his ex-wife lost a total of $107,000 CAD.

e. By March 1, 2003, J.D.W. and her late husband A.D.W. had deposited a total of $178,000 CAD with the LFG Group for investment purposes. Giuseppe Strazzeri helped them refinance their home in order to obtain the greater part ($110,000 CAD) of these funds (the balance came from cashing out RRSPs). All of their money was transferred to David Braganza. They recovered a total of $64,080 or 36%. Giuessepe Strazzeri is unable to account for the balance, let alone any of the interest payments promised. They lost a total of $113,920 CAD.

f. Between 2002 and 2005, Giuseppe Strazzeri invested a significant amount of his own funds with David Braganza. His losses were considerable.

g. Giuseppe Strazzeri received from David Braganza a return of between 3% and 4.75% per month on the investments made with him, including the investments made with the funds provided by A.G., J.D.W. and A.D.W. He did not disclose this fact to A.G., until Mr. Braganza stopped making payments.

h. Giuseppe Strazzeri performed minimal due diligence before investing the funds of A.G., J.D.W. and A.D.W. with David Braganza.

i. Giuseppe Strazzeri made efforts to locate David Braganza and to recover the funds that had been invested with him. He was also accessible to A.G., J.D.W. and A.D.W. during this process and kept them informed.

j. Giuseppe Strazzeri is licensed as a mortgage agent, but also describes himself as a mortgage broker. This fact is not only inferred from his testimony and from the online biography introduced into evidence, but also from the Request for Hearing form that the Applicant filed with the Tribunal on November 5, 2010, where he gives himself the following title: “Mortgage Broker”.

75Having made these findings of fact, the legal issue becomes the following: does this past conduct afford reasonable grounds to believe that Mr. Strazzeri will not deal or trade in mortgages in accordance with the law and with integrity and honesty?

4) Suitability of the Applicant

76A number of aspects of the Applicant’s past conduct are troubling. First, his decision to invest the funds entrusted to him by A.G., J.D.W. and A.D.W. with David Braganza was reckless, in light of the nominal amount of due diligence that he had performed with respect to this individual. Nothing precluded him from investing his own funds with Mr. Braganza, but to jeopardize the money deposited by his clients in this manner shows a reckless disregard towards their interests. Second, the Applicant personally benefited from the investments made with the funds of A.G., J.D.W. and A.D.W., in the sense that he received a fee from David Braganza. There is no evidence that J.D.W. and her late husband knew about this commission and the Applicant admitted that A.G. was not told. This conflict of interest was compounded by the fact that Mr. Strazzeri, himself, had invested significant funds with David Braganza. Third, the Applicant kept material information from A.G. with respect to the manner in which her funds would be invested – information that could have changed her decision had it been known. He did not tell her about David Braganza until after her money had been transferred and payments began to slow down.

77With these observations in mind, we now address the considerations listed in the Henderson decision (at p. 9):

a. The time that has elapsed since the conduct occurred: Approximately eight years have passed since the events that A.G., W.W. and J.D.W. have testified about. The Applicant testified that his business activities have been strictly focussed on the mortgage industry since 2005, and there is no evidence to the contrary. This period of time is significant and would have been given more weight, but for Mr. Strazzeri’s failure to acknowledge and accept responsibility for his past actions and omissions (see below).

b. The prolonged or repetitive nature of the conduct: The Applicant’s past conduct was not an isolated event, but involved multiple transactions and three different clients over a period of many months.

c. The advertent or inadvertent nature of the conduct: But for the Applicant’s conflict of interest, his recklessness in investing the funds entrusted to him by A.G., J.D.W. and A.D.W. could be viewed as a serious but unintentional mistake in judgment. However, the fact that he personally benefited from the investments made with David Braganza, and the fact that he did not disclose this matter, suggest that his conduct was more than reckless vis-à-vis his clients: it was intentional and dishonest. At best he was wilfully blind to the fraudulent nature of the investments made with the funds entrusted to him; at worst he participated with full knowledge.

d. The extent to which the conduct can be taken to call into question the integrity, honesty or law abiding nature of the individual: Taken as a whole, the Applicant’s recklessness in investing the funds entrusted to him, the position of conflict in which he placed himself, and his failure to disclose his personal interests call into question his moral compass.

e. The closeness of the context of the conduct to the context of activities in which the individual would be engaged as a mortgage agent: In two instances, the Applicant used his skills as a mortgage agent in order to facilitate the investments that were being made: (1) J.D.W. and her late husband refinanced their home on the basis of the advice that he gave them and with his direct help and (2) W.W. and his ex-wife L.W. invested funds in what the Applicant himself described as a mortgage loan.

f. The fairness of the process followed in the disciplinary proceeding: Prior to this hearing, the Applicant did not face any disciplinary hearing or criminal trial with respect to the conduct at issue. Accordingly, this factor has no application.

g. The seriousness with which the disciplinary body treated the conduct as reflected in the severity of the sanction it imposed: To date, the Applicant has not faced any sanction with respect to the conduct at issue. He has paid a price for the investments made with his own funds, but he has not been sanctioned anywhere for the manner in which the funds of A.G., W.W. and J.D.W. were invested and managed.

h. Any unusual and severe pressure the individual was under at the time of the conduct that would explain the conduct but is unlikely to reoccur: There is no evidence that the Applicant was under any unusual and severe pressure between November 2002 and January 2004, when the funds in question were advanced to him. In his own words, he was fairly new in business and did not have a lot of experience. However, his inexperience is no excuse for his actions and omissions.

i. Any consistent and prolonged pattern or reformed or redeeming behaviour on the part of the individual since the conduct occurred: There is no evidence to challenge the Applicant’s assertion that his activities have been strictly focussed on the mortgage industry since 2005. Moreover, the Tribunal heard from three character witnesses and they have described a pattern of behaviour consistent with the professional responsibilities of mortgage agents. That being said, the Tribunal remains troubled by two features of the Applicant’s behaviour. First, the Applicant has failed to acknowledge the seriousness of his past conduct. Although he admitted to making a “huge mistake” and to paying for it, these comments were made in reference to the money he and his family had invested with David Braganza – not in reference to the money lost by his clients. Second, the Applicant has shown contempt towards the licensing process established by the Act and regulations by describing himself as a mortgage broker, despite the nature of the licence issued by the Superintendent.

78From this analysis, the Tribunal concludes that there is clear, convincing and cogent evidence that the Applicant’s past conduct affords reasonable grounds for a belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty. In reaching this difficult conclusion, the Tribunal is mindful of the fact that our decision will have serious financial consequences on the Applicant. In particular, according to subsection 8(1) of Ontario Regulation 409/07, an individual whose mortgage agent’s licence has been revoked cannot apply for a new licence unless twelve months have passed since the revocation. However, the licensing regime established by the Act and regulations is designed to protect the public interest and enhance public confidence in the mortgage industry. In our view, this consideration must prevail in the circumstances of this case.

F. ORDER

79The Tribunal orders the Superintendent to carry out his Notice of Proposal to revoke the mortgage agent’s licence issued to Mr. Strazzeri.