Allegations of extortion and fraud have emerged from a bitter legal battle between Toronto-area businessman Roberto Sansone and Ottawa's Frank D'Addario, ousted founder of Environmental Management Solutions (EMS).
According to a Statement of Defence filed by Mr. D'Addario in Ontario Superior Court of Justice in Toronto on Nov. 29, he was invited to a meeting in Toronto last August by Mr. Sansone, president of 310 Waste Ltd. The reason for the meeting was to discuss the sale of Mr. D'Addario's nearly 8.8 million EMS shares with a prospective buyer. Mr. D'Addario states Mr. Sansone "was the director of business development of EMS since July 2005."
The court filings allege that, shortly after arriving at Mr. Sansone's office, brother "Giuseppe Sansone threatened D'Addario by pulling a hand gun, showed it to D'Addario and demanded that (he) sign certain documentation." In addition, "Giuseppe Sansone advised D'Addario that a vehicle was in Ottawa in front of his home and that D'Addario's family was being watched."
Mr. D'Addario's statement goes on to say he was given three documents to sign. The first, which he refused to sign, was an acknowledgement of a $5-million debt owed to Roberto Sansone. The other two, which he did sign, consisted of an agreement to pay $500,000 to Mr. Sansone if he found a buyer for Mr. D'Addario's EMS shares, and a single page document that contained only signature blocks for himself, his family trust and his company, 1301965 Ontario Inc.
Mr. D'Addario's statement of defence was filed in response to a lawsuit launched by Mr. Sansone on Oct. 17. The lawsuit alleged Mr. D'Addario was in breach of a March 1 "Consulting and Share Pledge Agreement" in which Mr. D'Addario purportedly agreed to pay Mr. Sansone $5 million for "soliciting shares and votes for a proxy fight" at EMS's April 29 shareholders meeting.
At that time, Mr. D'Addario was embroiled in a highly-publicized bid to oust EMS's board of directors, chaired by former Ontario premier Mike Harris, and president and CEO Tony Busseri. The so-called "dissident shareholders" led by Mr. D'Addario received 49.65 percent of the votes cast, leaving the Harris-led group with a miniscule majority.
Mr. Sansone alleges that in the March 1 agreement, Mr. D'Addario agreed to pay him a $240,000 consulting fee and a "one time lump sum fee" of $5 million "payable whether (D'Addario) won the proxy fight or not." Mr. Sansone further alleges that D'Addario pledged all his EMS shares and his Ottawa home as security in the agreement.
In his statement of defence, Mr. D'Addario claimed he saw the March 1 agreement for the very first time on Oct. 14, two days after he received a written demand for payment of the $5 million.
He also stated he "did not prepare, negotiate the terms of, agree to or sign the Agreement" and claimed that his "alleged signature on the Agreement was forged by Sansone or an unknown party at the request of Sansone" and that "any such signature was obtained under duress" during his Aug. 24 meeting with Mr. Sansone and his brother.
Mr. D'Addario alleges that the signature page he signed while being threatened "was fraudulently attached by Sansone and/or an unknown third party to the (March 1) Agreement." Mr. D'Addario's filing includes a counterclaim against Mr. Sansone for "aggravated exemplary and punitive damages" of $1 million.
None of the allegations contained in Mr. Sansone's or Mr. D'Addario's statements has been proven in court.
The lawsuit represents another bizarre twist in the life of Mr. D'Addario since he lost control of EMS, the firm he founded in Ottawa in 1995 and later took public
Since 2004, Mr. D'Addario has lost successive battles against a slate of directors that he had assembled and new senior managers for control of the $100-million company.
EMS has fought back, accusing Mr. D'Addario of improprieties during his tenure as president and CEO, such as the terms of employment arrangements with his brother and wife. Mr. D'Addario was forced to resign from the board in early 2005, when his fight to wrest control from the Harris-led group erupted into the open.
Both sides scrambled for proxies in the run-up to the April 29 shareholders meeting, and Mr. D'Addario immediately launched a court challenge of the results of the narrow vote.
Although numerous other suits and countersuits were before the courts, in December 2005 Mr. D'Addario worked out a deal with EMS and ceased all litigation in return for a $1.7-million settlement. That settlement was conditional on a $20-million recapitalization initiative with ONCAP II that received 97.9 percent shareholder approval at a special meeting on March 22.
The agreement between Mr. D'Addario and EMS does not affect Mr. Sansone's action, which is still before the court.
By Jeff Esau
Special to the Ottawa Business Journal