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Toronto fraudster apologizes over $40-million Ponzi scheme

Toronto fraudster apologizes over $40-million Ponzi schem

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Toronto dentist Peter Sbaraglia has apologized for participating in a Ponzi fraud scheme that raised more than $40-million from investors, including many of his friends and family members.

Mr. Sbaraglia was sanctioned Tuesday by the Ontario Securities Commission for helping steer investors into an investment fraud operated by business partner Robert Mander. Mr. Sbaraglia received a lifetime ban from working in the investment industry or trading securities, except within his own RRSP account.

He did not face any financial penalties, however, which OSC lawyer Pamela Foy acknowledged is unusual in a case in which investors have suffered such large losses. Ms. Foy said the commission had a receiver appointed in 2010 to take control of all of Mr. Sbaraglia's personal and business assets to try to recover funds for investors, so it felt that it had already imposed financial sanctions.

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At the hearing Tuesday, Mr. Sbaraglia apologized and said he takes full responsibility for the losses suffered by investors, who include his own parents, his sisters and members of his wife's family.

"I don't have words adequate to tell you how badly I feel," he said. "I don't think I'll ever make it up to them."

He added he regrets the day he ever met Mr. Mander in 2005. The partner died in 2010 at his home in Flamborough, Ont., near Hamilton, just as investors won a court order putting his company into receivership to seize assets and recover missing funds.

"From the moment Robert Mander killed himself, I took full responsibility," Mr. Sbargalia said. "I called every single creditor, and told them I'd sell my house, buildings, everything, to make good."

Mr. Sbaraglia insisted Tuesday he believed Mr. Mander and didn't know he was operating a fraud, and said he is suing his former lawyers for the advice they provided to him when he was setting up his investment business.

But OSC commissioner Alan Lenczner, who reprimanded Mr. Sbaraglia at the hearing Tuesday, said he was convinced by the evidence that Mr. Sbaraglia participated in actions he should have known were fraudulent.

"As an intelligent professional, you must have known you were acting in an unlawful manner," Mr. Lenczner said

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The OSC settlement agreement said Mr. Sbaraglia raised $21.1-million from investors, who were promised returns of 20 per cent to 30 per cent annually. Investors were told the money was to be invested by Mr. Mander, but the OSC alleged both men kept a significant portion of the funds for themselves as well as using later investors' money to make payments to earlier investors.

Mr. Sbaraglia was accused of raising $21-million, while Mr. Mander also separately raised funds, leading to total investments of more than $40-million, the OSC said.

A receiver's report filed in court said Mr. Mander spent most of the money he raised on houses, fancy cars, jewellery and art work -- including three Fabergé eggs.

The OSC said Mr. Sbaraglia misused funds himself, keeping $6-million to $7-million that was not forwarded to Mr. Mander as promised to investors, and instead used the money to make payments owed to other investors, to invest in securities himself "that resulted in significant losses" and to pay his own personal expenses, including restaurant meals and renovations to a building.

The commission also alleged Mr. Sbaraglia made many misleading statements to OSC staff when he was interviewed during an investigation in 2009. The OSC said Mr. Sbaraglia wrongly claimed that all his investors had approached him seeking to make investments, that investors' funds were not at risk, that most of the money had been invested in real estate assets, and that assets were available in excess of the amounts owed to investors.

Instead, the commission said Mr. Sbaraglia actively solicited money from investors, had not invested money in real estate holdings, had suffered large trading losses and did not have assets available to cover the amounts owed.

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At the end of Tuesday's hearing, Mr. Lenczner urged Mr. Sbaraglia to use his talents as a dental anestheseologist to help others.

"That will be the best way you can make it up to society," he said.

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About the Author
Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More


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