A COMMUNITY IN TURMOIL
Rocco Di Stefano was in good standing at his church. But when he sold investment certificates to congregation members it all went wrong and then the money was gone
Wednesday, December 05, 2007
The atmosphere was tense in the boardroom of the Fabre St. Pentecostal Church on a sultry night in July 2006 as the church’s pastor called a meeting of almost 20 congregation members to order.
Pastor David Mortelliti had convened the meeting as part of his efforts to shepherd his congregation through one of the worst crises in its 80-year history. Anger in the room was such that Mortelliti felt the need to appeal for calm at the outset.
At the other end of a large oval conference table from the portly, mustachioed pastor sat Rocco Di Stefano, a longtime congregation member and investment adviser to the families represented around the table.
By the count of one of the participants, those families were facing losses of at least $1.5 million on investment notes recommended to them by Di Stefano. Several were senior citizens – working-class Italian immigrants – trying to come to grips with the prospect of losing much of their life savings.
The investments were in unregistered certificates carrying high interest rates that were issued by obscure private companies.
By the time of the 2006 meeting, Di Stefano’s role in their sale to church members had become a source of rancour in the congregation, a part of the Canadian Assemblies of God, formerly the Italian Pentecostal Church of Canada.
The bad feelings were made worse because Di Stefano had been a member of the tightly knit evangelical Protestant congregation since his childhood.
What’s more, he had been a Pentecostal pastor who had headed his own congregation in Windsor, Ont., before returning to Montreal in the early 1990s.
Norbourg, Mount Real, Norshield, iForum – these are some of the names on the Quebec securities industry’s dishonour roll.
Compared with the hundreds of millions in investors’ savings that have been lost through them, Zema Finances Inc. and Rocco Di Stefano are small time players.
But the suffering they caused to a tightly knit community of Italian Canadians is no less because the dollar amounts are less.
In many respects , the losses incurred by the families offer in microcosm a picture of the damage caused by investment schemes like the one described here.
In a three part series we look at the genesis of an investment scandal:
Today: Rocco Di Stefano, the man at the centre of the storm
Tomorrow: Families in despair
Friday: Anatomy of a scheme gone bad
Although Di Stefano, 48, has constantly reassured his clients that they will recover their money, a Gazette investigation casts doubt on that claim.
One of the private companies in which Di Stefano’s clients purchased investments, an offshore outfit called Eurovision Financial Services Ltd., has been branded a fraud in bankruptcy proceedings, with total investor losses believed to run to at least $15 million.
In the case of another company called Zema Finances Inc., The Gazette has found troubling evidence of Di Stefano’s personal involvement in the firm alongside that of a convicted fraud artist. A third group of companies, known as Sodexin, is mired in financial troubles and the company’s president says investors shouldn’t expect to recover their capital for at least three years.
Yesterday, Quebec’s financial watchdog, the Autorité des marchés financiers, announced Di Stefano has been slapped with an order prohibiting him from making any form of investment operation or advising clients on securities. Almost 75 people, most of them members of the Fabre St. congregation, have filed complaints against Di Stefano, an AMF spokesman said.
Among the AMF’s allegations against Di Stefano is that he used his status as a life insurance agent to contact widows to solicit them to invest their insurance payouts in Zema Finances.
Even though air conditioning shielded the boardroom from the oppressive heat outside that July evening, the emotional temperature around the table quickly soared when Di Stefano, flanked by his wife, began to speak.
He insisted that the people’s money was not lost and that he was working to get it back – a promise his clients say they had heard many times before.
He painted himself as a victim because he himself had invested in Eurovision and now was under attack from clients demanding their money back, according to the recollections of participants in the meeting.
Then, Di Stefano turned the tables on his clients, telling them they had to accept some responsibility for the investments.
“When things were going well, everybody loved me. Now that the companies are going down, everybody hates me, as if I’m responsible.”
Congregation members angrily retorted that Di Stefano had presented the investments as safe and guaranteed.
“You keep promising that we’re going to get our money, but we’re not getting anything,” one person told him.
Of the meeting, Di Stefano said in an interview: “I remember people coming out against us … saying I defrauded them and so on. I don’t believe in any way that I have.”
Within a month of the meeting, the church’s board had met and prepared an announcement that Pastor Mortelliti later called “a fraternal admonition” to Di Stefano. It was aimed at alerting the congregation to problems involving Di Stefano and investments. It called on him to be forthcoming with clients about what he knew about the companies.
During the Sunday service of Aug. 20, 2006, Mortelliti read the statement in church and asked the congregation to pray for the families of the victims and Di Stefano and his family. He was in attendance.
“We asked him to be upfront, to be forthright. If he knew there was something to share with his clients, to do it,” Mortelliti said after a recent Sunday service at the church, where congregation members refer to each other as brother and sister and foot-tapping gospel songs are accompanied by an eight-piece band, including drums and horns.
Di Stefano has never returned to the Fabre St. Church.
In the months since, the anger has only grown among Di Stefano’s clients both inside and outside the Fabre congregation.
The Gazette has interviewed representatives of six families who say they invested their savings on the advice of Di Stefano with disastrous consequences stretching back to the late 1990s. Collectively, they say they are facing losses of more than $1.3 million on the notes.
Di Stefano said about 20 clients had invested $1.5 million in Eurovision, about 25 had invested an equal amount in Zema Finances and six to eight clients had invested about $300,000 in Sodexin.
Some of the clients invested in more than one of these companies and some had recovered money, he said.
Family members interviewed by The Gazette say they became clients of Di Stefano through personal connections and some said they were approached after they had recently come into a large sum of money.
The investors, including several seniors, tell heart-rending stories of their regret, anguish and feelings of helplessness and betrayal over the loss of their savings.
Di Stefano, who was licensed to sell insurance and mutual funds, was fired this year by mutual fund dealer Ten Star Financial Inc. over the investments. Ten Star president David Baird said the investments were not executed through his firm and Ten Star was unaware of them until it was served with lawsuits from disgruntled clients.
Baird said Ten Star also fired Di Stefano’s former partner, Ronald Greeley, over investments he sold to his clients without the firm’s knowledge.
Both Di Stefano and Greeley have been called to appear before disciplinary hearings before the Chambre de la securité financière, a body that regulates mutual fund and insurance advisers. Greeley is to appear next week, and Di Stefano’s hearing is in March.
Greeley said he sold Eurovision and Sodexin notes to a small number of his clients and added he believes he acted in good faith and has never taken anyone’s money for himself.
Di Stefano, too, maintained in an interview that he has not put one cent of his clients’ savings in his pocket.
“If I was to say: ‘I’m going to run away. I’m going to go into hiding. Well, then, yeah, I scammed you,” he said. “But I didn’t. That’s why I’m still here. … I’ll face the music, as we say, and get things done and let it get done.”
He said two of the companies – Zema Finances and Sodexin – are getting back on their feet and will be paying off on their obligations to investors.
He even held out hope that investors may recover their money from bankrupt company Eurovision, a company that collapsed in 2003. Its principals, Armando Ferrucci and Victor Lacroix, left Montreal amid allegations of fraud.
As for the investors, Di Stefano claimed they were looking for investments paying fixed rates of return after the stock market decline of the early part of the decade and added “no one held a gun to any client’s head.”
For his former clients, there is no end in sight to the anger, frustration and, in many cases, financial struggles that they’ve been left with in the aftermath of doing business with Di Stefano.
“It’s not like $10,000 and you’ll recuperate from it,” said one man who says his family is struggling to make ends meet after losing heavily on investments recommended to him by Di Stefano. “It’s always knocking on the door. It’s always right there.”