Statement of Facts, Norma Walton
STATEMENT OF FACTS OF NORMA WALTON
Thursday, September 19, 2019
1. Between 2001 and 2010, Norma Walton through her company The Rose and Thistle Group Ltd. purchased and improved 28 properties, selling 19 and keeping 9. By September 2010 she and her husband had a net worth of $15 million based on a property portfolio worth about $50 million.
2. In 2006 Norma gave birth to twin boys and in 2008 her daughter was born.
3. Dr. Stanley Karl Bernstein was a lender of hers between September 2008 and September 2010, funding and being paid back on eight mortgage loans, at which point he requested to become an equity partner.
4. Had Norma known that Dr. Stanley Karl Bernstein had been charged with conspiracy to murder his business partner; had she known that his two co-accused were convicted at trial; had she known that he had been charged with possession of $2 million worth of stolen goods; and had she known about his history of vicious and destructive litigation, she would have rejected his request to become partners. Now all that information is readily available on Wikipedia. Back then it was hidden.
5. In the 33-month period between September 2010 and June 2013 Norma and Dr. Bernstein purchased together 31 properties. During that partnership, Dr. Bernstein funded the purchases and Norma through her company The Rose and Thistle Group Ltd. developed the properties to increase their value. By the summer of 2013, the portfolio was worth $330 million with debt of $210 million, having created equity of $120 million.
6. During the same period, the Waltons added to their own portfolio such that by the summer of 2013 the Waltons’ portfolio without Dr. Bernstein was worth $135 million with debt of $100 million.
7. During that same period, Norma’s husband Ron was diagnosed with deep vein thrombosis and that diagnosis coupled with his back problems and hypertension caused him to become unable to work full-time.
8. By the summer of 2013, between the two portfolios, the Waltons had over $465 million of real estate and a net worth of $55 million. By this point, Ron was becoming unable to work at all.
9. Dr. Bernstein was always a hands-off partner, wanting Norma to shield him from any public responsibility or personal liability within the partnership, which she did. Dr. Bernstein wanted to play no active role, happy to delegate all decisions to Norma. She ran the portfolio in her complete discretion, with his full consent, and by all accounts it was thriving.
10. Norma admits that she made a number of mistakes in running her company. Across the portfolio, she had 57 properties, 85 corporations and 40 staff. She grew the company far too quickly without the back-end accounting support and internal personnel required to keep up with its growth. She was scrambling. She made errors in judgment. She is disappointed in herself in many ways as she reflects on what happened.
11. Norma gave birth to her fourth child via caesarian section on May 7, 2013. By June 5, 2013, within 28 days of giving birth, she was back in the office running her company with new baby in tow. Just before returning to the office, she moved into a new home with three young children at home. This was an investment property on Park Lane in the Bridle Path that Norma purchased in June 2012. It has been alleged by the Crown that she used Dr. Bernstein’s money to buy that investment. She did not.
12. In June 2011, a full year before Dr. Bernstein bought in, Norma incorporated Red Door Developments Ltd., a property development company. She worked on increasing the value of that company and the property it had contracted to purchase in the year between June 2011 and June 2012. By June 2012 Dr. Bernstein wanted to buy into that project. Based on the value of the company at that time, he agreed to pay $2.3 million in exchange for the transfer of 50% of the shares in Red Door Developments Ltd. to his company. He received the $2.3 million of shares and in exchange he paid Norma the $2.3 million in cash. Once he received the shares and the corresponding 50% interest in the company and the property it owned, he was no longer entitled to the $2.3 million purchase price for those shares. It was that cash…the money paid to her in exchange for 50% of her shares…that Norma used to purchase the Park Lane investment property.
13. A few weeks after her return to the office, in late June 2013, Dr. Bernstein requested to withdraw the sum of $2 million from the joint portfolio to purchase a house for his son in New Jersey. He indicated that he needed the money by July 31, 2013, otherwise he would lose his deposit, and that he was depending on Norma to obtain it. He had never requested to withdraw money from the portfolio before.
14. During that same time period, Norma realized that the joint portfolio required about $4 million of capital to deal with some urgent cash flow requirements pending a few sales scheduled to close in the fall of 2013. In the past she would have gone to Dr. Bernstein for the cash infusion but given that he was looking to withdraw money from the portfolio himself at that time, he was not able to contribute.
15. As a result, Norma arranged two mortgages totaling $6 million closing July 31, 2013 on two Don Mills properties she jointly owned with Dr. Bernstein. They were used to pay the $4 million needed by the joint portfolio and to provide the $2 million to Dr. Bernstein.
16. Just before the Don Mills mortgages closed, she also arranged to refinance a St. Clair property the parties owned together and was able to pay Dr. Bernstein $840,000 from that property. As a result, Dr. Bernstein indicated he did not need any more money for the purchase of his son’s house.
17. When Dr. Bernstein did not need the $2 million, Norma withdrew the sum of $1.615 million from the jointly owned mortgage proceeds and recorded it as a shareholders’ loan. She personally guaranteed the monies.
18. The partnership between Dr. Bernstein and Norma broke down in the fall of 2013. Dr. Bernstein was upset that she had moved into a larger lot than his in the Bridle Path, his neighbourhood. He wanted that property for one of his sons. He was so upset he tried to purchase her first mortgage on that property from Home Trust, being beaten out by the second mortgagee who scooped it up before he could. When it was sold via power of sale by the lender, Norma was in the process of severing that property with a view to selling it as two parcels instead of the one she had purchased.
19. In the fall of 2013, Dr. Bernstein demanded repayment of the $1.615 million shareholders’ loan. Norma refinanced one of her own properties and repaid $1.7 million within 30 days of demand.
20. Dr. Bernstein refused to mediate or negotiate with Norma in September 2013 despite all their contracts mandating mediation and arbitration instead of litigation. That same month he personally hired Harlan Schonfeld to investigate Norma. Cooperating, Norma permitted Mr. Schonfeld and his staff into her offices. Six months earlier in March 2013 she had permitted Dr. Bernstein’s accounting staff including James Reitan to work full-time from her offices. She had nothing to hide.
21. Dr. Bernstein began litigation on October 1, 2013 and on October 4, 2013 he had Justice Newbould appoint Mr. Schonfeld as the “neutral” court-appointed Inspector with Dr. Bernstein’s CFO James Reitan being appointed as part of his “neutral” inspectorship team.
22. One month later on November 5, 2013 Dr. Bernstein petitioned their joint real estate portfolio into receivership. He did not give notice to the mortgage lenders of the petition for receivership. He intended to replace Norma with Harlan Schonfeld so he could continue making money through the joint real estate portfolio. Harlan Schonfeld became the “neutral” court-appointed receiver in addition to being the “neutral” court-appointed inspector.
23. Even though all mortgages were in good standing as of November 2013, the moment the receivership order was made all of them went into automatic default. As a result, all of the mortgagees lawyered up and came out in force requesting to power of sale their respective properties. This spelled disaster for the joint portfolio and cost multiple millions of dollars in lender fees, loan penalties and lender’s lawyer’s fees.
24. In December 2013 Norma, with the support of one of her mezzanine lenders, offered to pay Dr. Bernstein $141 million in exchange for transfer of his half of the joint portfolio to her. This represented full payment of his $78 million of equity; full payment of his $29 million of debt; and payment of a $34 million profit, double what he was owed. This would have ended the litigation and permitted Norma to try to save the portfolio.
25. In rejecting her offer, Dr. Bernstein told her that he wanted her bankrupt and in jail. When she queried him, telling him she thought he would likely win the litigation but lose all his money, he repeated his objective that he wanted her bankrupt and in jail.
26. As a result of his litigation and the resulting power of sale and receivership sale of the jointly owned portfolio for 70 cents on the dollar, Dr. Bernstein has recovered the sum of $44 million over the past six years. Norma has recovered nothing. Norma’s 43 third party investors have recovered $4 million of their $14 million. Dr. Bernstein has taken over 14 of the jointly owned companies and merged them with his diet clinic business to take advantage of the tax losses. Dr. Bernstein bought through power of sale one of the Walton’s properties at 2454 Bayview Avenue. He is being sued for $14 million by one of the joint portfolio lenders based on alleged deceit. He has paid over $10 million in lawyer’s, inspector’s, receiver’s, public relations, and private investigation fees.
27. Had Dr. Bernstein instead mediated with Norma and had the parties been able to resolve their differences, the joint portfolio would now be worth over $1 billion and his share in it would be worth $300 million.
28. Instead, the $44 million he has recovered over the past six years is $97 million less than Norma offered to pay him in December 2013 and $256 million less than his share would have been worth today had he agreed to mediate instead of to litigate.
29. In 2014 Dr. Bernstein hired a fellow named Tom Hartford, a former fraud squad police officer and now a private investigator, to review the transactions between the partners with a view to trying to send Norma to jail. Mr. Hartford went in to meet with his former colleagues at the fraud squad under Dr. Bernstein’s mandate. Between 2014 and 2016, Dr. Bernstein then sent in his team of litigation lawyers; his CFO; the “neutral” court-appointed inspectors; and the “neutral” court-appointed receivers to have Norma charged. As a result, in April 2016 Norma was charged with theft related to the shareholders loan. This was a full two and a half years after she had fully repaid the shareholders loan.
30. Also in 2016, Dr. Bernstein moved for judgment of $66.9 million against Norma on the basis of fraudulent misrepresentation. Norma begged for a trial but Justice Newbould refused. His Honour awarded Dr. Bernstein the $66.9 million because he accepted his written evidence that had he known how she was running the portfolio he would never have invested any money with her. Hence he ordered rescission of all the money Dr. Bernstein had invested less what he had recovered to that date. Since then Dr. Bernstein has recovered approximately $8 million more in cash from the properties and has taken ownership of 14 of their joint companies to enjoy tax losses, hence the amount due from Norma has been reduced.
31. This judgment makes it legally impossible for Norma or her husband Ron to ever make or accumulate any money. It cannot be bankrupted out of. How the Court expects Norma to support her husband and her four children in the face of this judgment is an open question. It is difficult for Norma to comprehend how that sort of judgment is fair or just in any circumstances, much less in Canada, and much less in a case where Dr. Bernstein refused an incredibly lucrative offer to settle that would have seen him made completely whole plus provided him with a $34 million profit.
32. In 2017, just before Justice Newbould retired, he had occasion to witness Dr. Bernstein give verbal testimony in the Trez Capital litigation whereby the lender is suing Dr. Bernstein for $14 million on the basis of deceit. After hearing Dr. Bernstein and his CFO James Reitan give their evidence, Justice Newbould rendered his decision rejecting both Dr. Bernstein’s and Mr. Reitan’s evidence as lacking credibility. He went on to say, quite remarkably, that had he known back in November 2013 what he knew in 2017, he would have never ordered the receivership.
33. Dr. Bernstein and Mr. Reitan’s evidence against Norma was never tested in open court in the civil case between Dr. Bernstein and the Waltons. Everything was done based on written evidence. Norma repeatedly requested a trial because she knew that Dr. Bernstein and his CFO James Reitan were not telling the truth in the matter. The Trez Capital decision by Justice Newbould calls into question the $66.9 million judgment he previously awarded Dr. Bernstein in the civil matter with the Waltons. Had Justice Newbould had the benefit of hearing Dr. Bernstein on the stand, Norma believes it is doubtful he would have made that judgment against the Waltons.
34. Dr. Bernstein’s lead lawyer in the civil matter bragged in May 2019 at the Supreme Court of Canada that the civil litigation between Dr. Bernstein and Norma had resulted in over 250 appearances and orders being made including four in the Court of Appeal. She complained that Dr. Bernstein was vilified by the court. She lost on his behalf in the highest court in the land, with Justice Brown saying to her that he “could not get behind this stunt of yours playing fast and loose with the rules of knowing assistance.”
35. The theft convictions against Norma relate to the $1.615 million shareholders’ loan from her own Don Mills companies that she jointly owned with Dr Bernstein; that she personally guaranteed; and that she repaid in full within 30 days of his demand.
36. Dr. Bernstein paid for up to three lawyers a day to sit in the 4 ½ week criminal trial against Norma, assisting the Crown as required. Dr. Bernstein paid for up to two lawyers a day to sit in the sentencing hearing. Given the money spent by Dr. Bernstein both during the criminal trial and to bring the charges in general, Norma’s family and friends have taken to calling the theft convictions a bought verdict.
37. Norma is just one in a long line of people that Dr. Bernstein has attacked through litigation. He uses litigation as his weapon of choice. This started with his first wife, the mother of his three sons. He sued her and took her to trial and to the Court of Appeal over money and access rights then wondered why his three sons were estranged from him for five years. He has never stopped, having sued more than 20 people since then. He is energized by litigation and sees it as a legal way to destroy his enemies.
38. As can be seen above, for the past six years, without break, Dr. Bernstein has relentlessly pursued civil and criminal litigation against Norma. This attack has cost him over ten million dollars in lawyer’s fees, private investigator fees, inspector fees, receiver fees, and public relations fees. His obsession has resulted in her being under attack for 72 straight months with every transaction she ever entered into during their partnership being dissected, analyzed, criticized, criminalized, and publicized.
39. During that six-year time frame, she has lost everything: her reputation; her home; her business; her income; her properties; her money; her ability to rebuild; her license to practice law; her ability to take her sons to out-of-province hockey tournaments; and thousands of hours of her time. Her parents and her mother-in-law have mortgaged their homes to pay over $1 million in criminal defence bills. She is now subjected to a $66.9 million judgment out of which she cannot bankrupt. She is a convicted thief and is facing significant jail time. By all accounts, Dr. Bernstein has won the battle against Norma. He has destroyed her in every way possible.
40. What remains intact is her marriage; her children’s happiness; her love of life; her sense of humour; her gratitude for being alive; her health; her close relationship with her parents; her love for her extended family; and her ability to count on a handful of foul weather friends whenever she is in need. It could be said she remains rich in every way that matters.
41. Norma must now go to jail for her decision nine years ago this month to partner with someone like Dr. Stanley Karl Bernstein. She is heartbroken for her children, her husband and her parents. She is distraught by what the immediate future will hold. She is disillusioned and disappointed by the justice system given its failure to prevent its monied manipulation for malevolent ends.
42. Norma has been touched by those people who have reached out to her and to her husband to provide their support at such a difficult time. She appreciates the hugs she has received. She is even more grateful for how her children’s friends, school mates, teammates, their parents, the children’s coaches, and the children’s teachers and principals have rallied around them to protect them. She is humbled by their kindness and wanted to say thank you.
43. Norma will be appealing the conviction. Michael Kohl will be representing her on the appeal.