OTTAWA — Ottawa investors who allege that Thomas G. Assaly misappropriated $3.3 million they invested in two of his real estate projects petitioned the Ontario Superior Court on Monday to put a charitable foundation he controls into bankruptcy.
The move followed an interim order issued last week in a parallel action freezing Assaly’s assets. along with those of the charitable foundation and four of his companies.
The foundation — created by Thomas G. Assaly’s father, the legendary developer Thomas C. Assaly — is connected to investor allegations involving the misuse of money they put into Nature’s Walk, a proposed gated community near Kemptville, and Villa Montague, a retirement residence near Smiths Falls.
Neither project has proceeded, and court-appointed inspector Doyle Salewski has found that both are “hopelessly insolvent and in stages of abandonment.�
The 56-year-old Assaly, who now lives in an oceanfront house in Florida owned by his charitable foundation, denied any wrongdoing in an affidavit filed with the court in March.
“At no time did I misappropriate any investor funds for my own personal use or benefit,� he said in the sworn statement. “All of the investors’ funds were spent on the projects they invested in an for no improper purpose.�
Earlier this year, Doyle Salewski reported that Assaly had consolidated the investment accounts of all of his companies within the account of the foundation, formerly known as the Thomas C. Assaly Charitable Foundation, but now called the Millennium Education and Research Charitable Foundation.
Records showed that since September 2011, Assaly had authorized the transfer of more than $800,000 from the foundation’s account to his companies or other parties in the United States, including $417,000 transferred days after he received notice of the court-appointed inspection.
As of the end of February, there was just $1,478.43 in the foundation’s Canadian investment account, according to a statement from TD Waterhouse filed with the court.
Putting the foundation into bankruptcy would allow the appointment of a bankruptcy trustee with sweeping powers of investigation. It would also make it easier to get assistance from authorities in the U.S. to identify and recover funds there.
After hearing representations from the parties, Judge Stanley Kershman adjourned the bankruptcy motion until September after Assaly lawyer John Smith explained that the foundation recently hired Toronto lawyer Shael Eisen, who was unable to attend Monday’s hearing.
Until now, Smith had represented the foundation, but decided to withdraw after determining that Assaly’s interests could differ from those of the foundation. Assaly and his wife, Karen, are currently the foundation’s only directors.
The interim order issued last week by Superior Court Judge Paul Kane prohibits Assaly, his companies and the foundation from “selling, removing, dissipating, alienating, assigning, encumbering or similarly dealing with� those assets. It also bars them from “instructing, requesting, counselling, demanding or encouraging� any other person to do so.