But says he may compromise on portlands deal 

By Jack Lakey                     Toronto Star City Hall Bureau

The city may be in for a nasty court fight if it wants tycoon Steve Stavro to give up a 20-year lease granted to him on prime Toronto portlands. 

Stavro sent a letter this week to the Toronto Economic Development Corp. saying he negotiated the deal in good faith and that he expects TEDCO to honour the lease. 

TEDCO's board of directors voted last week to ``set aside'' the new lease it signed with Stavro's Sevendon Holdings Ltd. because it was badly misled about the terms of the deal by its former chairman, Fred Eisen. 

James Villeneuve, who's been the chair of TEDCO since Eisen resigned, said the board has a lawyer's opinion that the new lease may not be enforceable due to Eisen's misrepresentations, and because it was never approved by a vote. 

But Stavro's May 17 letter indicates that the sports and grocery magnate believes TEDCO is bound by the terms of the new lease, Villeneuve said, and also says that he is willing to compromise. 

``It looks like their perception is that there is room to negotiate on the new lease,'' Villeneuve said yesterday. 

``But from our perspective, it can't be more clear. The Dec. 1 lease has been set aside because we do not believe it was negotiated in good faith.'' 

Villeneuve was not accusing Sevendon of any wrongdoing; he said he could believe that the company felt it was negotiating in good faith, ``but certainly from this end, the TEDCO board believes it was misled on the whole thing.'' 

``I don't believe this board would ever have approved that deal, had it known what was actually in the lease.'' 

Neither Stavro nor Howard Wood, a Sevendon vice-president, returned calls from The Star yesterday. But in a confidential report submitted to city council last week, lawyer George Rust-D'Eye said he had seen nothing to suggest wrongdoing by Stavro. 

Eisen resigned as chair of the TEDCO board March 30, a week after The Star revealed that TEDCO tore up leases that had seven years to run, in order to give Stavro a lease for more land on Cherry St. than he previously held. 

Occupied by a Knob Hill Farms supermarket, the land would greatly increase in value if the area is redeveloped for the 2008 Summer Olympics, or for the proposed $12 billion waterfront renewal project. 

The 2.4 hectares of Stavro's new lease run along Cherry St., from south of Polson St. to Commissioners St. 

The report by Rust-D'Eye concluded that Eisen ``deceived the board (about) the nature and legal ramifications'' of the new lease at a Jan. 25 board meeting. 

Villeneuve said Stavro's letter stated that: ``Sevendon and TEDCO have a binding and enforceable lease agreement which was negotiated in good faith. We have performed all of our obligations under the lease agreement and intend to continue to do so. We expect TEDCO to do the same.'' 

City council voted last week to ask the Ontario Provincial Police to probe the deal, but Villeneuve said that, as of yesterday, nobody has met with OPP investigators to hand over TEDCO's evidence. 

Mayor Mel Lastman has repeatedly asked Stavro to walk away from the deal, saying that a court fight would be ``messy.'' 
 

Ex-TEDCO chief `deceived board,' charges new report by lawyer 

By Jack Lakey  Toronto Star City Hall Bureau

Toronto city council will ask the Ontario Provincial Police to investigate a controversial lease granted to tycoon Steve Stavro, after receiving a scathing lawyer's report on the deal. 

The confidential report says that when the board of directors of the Toronto Economic Development Corp. (TEDCO) considered Stavro's lease for prime land in the port area, the agency's former board chairman took ``extreme measures to ensure that (TEDCO's board of directors) had no knowledge about the true nature of the transaction placed in front of them.'' 

The report, written by lawyer George Rust-D'Eye, says that Fred Eisen ``deceived the board (about) the nature and legal ramifications'' of the new lease they were asked to approve at a Jan. 25 board meeting. 

``There is every indication that this misrepresentation was intentional, amounting to deceit.'' 

Councillor Pam McConnell, who is also a member of the TEDCO board, and Councillor Sandra Bussin made motions at a city council meeting yesterday to call in the OPP, and to have the deal examined in a forensic audit. 

Currently occupied by a Knob Hill Farms supermarket, the valuable port land is central to Toronto's bid for the 2008 Olympic Games, and to a proposed $12 billion waterfront renewal project. 

While the report raises questions about the role of Stavro's Sevendon Holdings Ltd. in the way the deal was represented to the board of the city agency, Rust-D'Eye says he has not uncovered anything to suggest wrongdoing by Stavro. 

``It must be emphasized at the outset that I do not believe I have found any evidence of wrongdoing or improper conduct on the part of Mr. Steve Stavro personally, with respect to the transactions that led to the execution of the new lease,'' the report says. 

Stavro - who owns the Knob Hill Farms supermarket chain and the Maple Leafs, the Raptors and the Air Canada Centre - could not be reached for comment yesterday. He has not returned previous calls from The Star. 

Rust-D'Eye's report includes a letter from a former TEDCO vice-president, claiming that Eisen forced her to resign because she refused to ``conceal information'' from the board about the actual terms of the lease. 

The letter from Deborah Graffmann also says she was told to draft minutes of the Jan. 25 meeting to show that the lease was unanimously approved, even though board members never voted on the deal. 

Rust-D'Eye goes on to say that, while ``there appears to be no evidence of corrupt or improper conduct on behalf of Sevendon, but merely an attempt to drive a better deal,'' he points out that ``what Sevendon received could be construed as `too good to be true.' '' 

Eisen resigned as board chair March 30, a week after The Star revealed that TEDCO tore up leases that had seven years to run in order to give Stavro a lease for more land on Cherry St. than he previously held. 

The 2.4 hectares of Stavro's new lease run along Cherry St., from south of Polson St. to Commissioners St. 

Toronto's bid for the 2008 Olympics places the proposed 100,000-seat Olympic stadium right across Cherry St. from Stavro's holdings. An Olympic cultural plaza is planned for the site Stavro holds. 

 Councillors were `floored' by lawyer's report on the machinations behind the TEDCO lease deal 

McConnell (Don River) has been pushing to get to the bottom of the deal ever since questions were raised in The Star's stories. 

``The best way to deal with this matter is to shine a very thorough light on it,'' McConnell said yesterday. 

``The importance of what we know so far is that it shows that the members of the board were misled and did nothing wrong. It could have happened to anybody. 

``By asking the OPP to investigate this, we are turning over the evidence that has been gathered so far to the people who are experts in criminal matters.'' 

Rust-D'Eye, a former solicitor for the old Metro government, was hired by TEDCO because of his expertise in municipal law. 

Bussin said that Rust-D'Eye's report, and an earlier report by city staff ``would lead, I think, any reasonable person to the conclusion that there needs to be a further investigation.'' 

Bussin (East Toronto) noted that none of the lawyers who have so far looked into the deal have expertise in criminal matters, ``and we need to bring a forensic auditor to do a more thorough investigation.'' 

In a private meeting of city council yesterday morning, Rust-D'Eye provided a briefing that ``floored'' people in the room, because of the depth of the deception revealed to them, said Councillor Howard Moscoe. 

 Former TEDCO vice-president says Eisen told her to `keep my mouth shut' when lease was presented to the board 

Rust-D'Eye's report includes a letter from Graffmann in which she says Eisen told her to ``rewrite my original recommendation to the board in which I noted that this lease was a renegotiation and (Stavro) was not entitled to an automatic renewal.'' 

She says she was also ``ordered to `keep my mouth shut' at the Jan. 25 board meeting and not to respond to any queries that board members may have had. 

``There was no doubt that because I was insistent that standards and fairness be equally, or at least rationally, applied in all dealings with TEDCO properties that my situation was made increasingly unbearable. I was forced to either adjust to the way of doing business, inclusive of accepting responsibility for misdeeds, or to terminate my employment. I terminated.'' 

Graffmann refused to comment when reached by telephone yesterday. 

Rust-D'Eye noted that while Graffmann's claims ``are simply allegations made by a former employee,'' he put them in his report because ``what she says is, to the extent possible, fully corroborated by objective evidence. 

The report says the lease deal was dealt with by the TEDCO board in just over five minutes, and Eisen tried to seek a vote to approve it barely a minute after the item was introduced. 

The issue went on as long as it did only because of questions raised by McConnell and Councillor Mike Feldman (North York Spadina), who has since resigned from the board. 

But in that time, Rust-D'Eye's report concludes, Eisen misrepresented the terms of what the board was being asked to approve a total of eight times. The misrepresentations were so numerous that Rust-D'Eye created a separate appendix of them in the back of his report. 

He also created an appendix of information that Eisen had a duty to provide to the board, but didn't. That appendix contains 17 points that Eisen failed to provide. 

``As chairman and a director of TEDCO, Eisen owed a fiduciary duty to the board to provide it with accurate information and full disclosure of all facts pertinent to the matter before them and, generally, to act in the best interests of TEDCO.'' 

The report also concludes that Eisen got rid of many of the paid staff during the one-year period that he was on the TEDCO board and effectively took over the role of president and chief executive officer. 

``As several staff and board members whom I have interviewed have suggested, Eisen acted as a `one man band' in conducting the affairs of TEDCO.''
 
 

TEDCO board decides controversial deal invalid and awaits his response 

By Jack Lakey  Toronto Star City Hall Bureau

NO DEAL: Steve

 Stavro will have to go to court if he wants the city to honour his new lease.

Steve Stavro's controversial 20-year lease on prime land in the port area has been scrapped. 

The board of a city agency that was misled into giving the sports and grocery magnate the lease has decided it isn't valid and won't honour the deal. 

If Stavro insists that the Toronto Economic Development Corp. (TEDCO) abide by the lease, he'll have to take the agency to court to make it stick, say members of TEDCO's board of directors. 

The TEDCO board has been advised by top municipal lawyer George Rust-D'Eye that the lease with Stavro's Sevendon Holdings Ltd. should be ``set aside,'' said James Villeneuve, the board's interim chairman. 

The board approved a motion Monday saying TEDCO ``is not bound by the form of the lease purported to have been entered into on its behalf . . . on the grounds that it at no time authorized the entering into of such a lease, nor did it authorize any person to execute such a lease on its behalf.'' 

The motion was based on legal opinions that the terms of Stavro's new lease were misrepresented to the TEDCO board by its former chair, Fred Eisen, and that it never properly approved the deal by a vote, as required by its bylaws, Villeneuve said. 

``We're not taking any legal action (against Stavro or Eisen), we're just setting aside the lease,'' said Villeneuve, adding that, ``we're prepared to defend ourselves, obviously, if Mr. Stavro responds in a negative way.'' 

It's possible that TEDCO could end up in court to unravel the lease, said Villeneuve, noting that Toronto City Council has been told by its lawyers that Stavro may have legal grounds to insist the lease be upheld. 

Stavro, who through another company owns the Toronto Maple Leafs, the Toronto Raptors and the Air Canada Centre, could not be reached for comment yesterday. 

Howard Wood, Sevendon's vice-president, said, ``I don't want to talk to you about anything,'' when contacted by The Star yesterday. 

Eisen resigned as board chairman March 30, a week after The Star revealed that TEDCO tore up leases that had seven years to run to give Stavro a lease for more land on Cherry St. than he previously held. 

Occupied by a Knob Hill Farms supermarket, the land would increase in value dramatically if the area is redeveloped for the 2008 Summer Olympics, or as part of the proposed $12 billion waterfront renewal project. 

The 2.4 hectares of Stavro's new lease run along Cherry St., from south of Polson St. to Commissioners St. 

Toronto's bid for the 2008 Olympics places the proposed 100,000-seat Olympic stadium right across Cherry St. from Stavro's holdings. An Olympic cultural plaza is planned for the site Stavro holds. 

A report by the city's auditor, solicitor and chief administrative officer concluded that Eisen ``misled'' the TEDCO board about the terms of the new deal with Stavro, and its obligation to renew the lease, at a Jan. 25 meeting. 

Villeneuve stressed that Stavro's Knob Hill Farms store has been a good tenant since the 1970s, when the store first opened, and that the board wants to honour the original lease, which was good until the end of 2006. 

City council voted last month to ``apprise'' the Ontario Provincial Police of its investigation of the deal and Rust-D'Eye's probe. 

Councillors say they thought they voted to have the OPP start a criminal investigation. 

But OPP commissioner Gwen Boniface has been faxed only a copy of the city council motion. 

Villeneuve said that Rust-D'Eye has told TEDCO that so far he hasn't found evidence of criminal wrongdoing.