Defendants strike back at D'Addario's $12.5 M suit

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Ottawa businessman Frank D'Addario has taken aim at a former business associate and the man's aunt with a $12.5-million lawsuit that claims the pair conspired against him.

In court documents, he alleges they conducted a "campaign" using the Internet, media and business contacts to defame and threaten him; fabricated evidence; and gave perjured testimony to police to cause a "false criminal charge to be laid" against him. That charge, for an alleged assault against the former business associate's 68-year-old aunt, was laid in Orillia on April 26, following an investigation by the Mnjikaning police. This detachment has jurisdiction over the Casino Rama north of Orillia where the assault is alleged to have occurred in September 2005. In his statement, Mr. D'Addario says the "allegation is categorically untrue."

The statement of claim filed by the ousted founder of Environmental Management Solutions (EMS) on July 28 also alleges The Ottawa Citizen and other media "repeated defamatory words" in three articles published in April and June of this year that refer to the circumstances surrounding the sexual assault charge. However, Mr. D'Addario is not suing the publications, contending "the defendants are responsible in law for the republication of the defamatory statements" and that they "contacted the Ottawa news media to ensure they were present in Huntsville, when the charges were laid."

The identity of the alleged victim is protected by a publication ban, and the OBJ is withholding the nephew's name to avoid identifying the woman.

The defendants countered with a notice of motion filed in the Ontario Superior Court on Aug. 24 seeking to have Mr. D'Addario's statement of claim struck on the grounds that it contains "improper pleadings," fails to disclose "reasonable cause of action," and its allegations are "frivolous, vexatious or otherwise an abuse of process." The motion will be heard on Oct. 24 in Ottawa.

In a statement provided to OBJ last week, the nephew wrote "we vehemently deny" the allegations in Mr. D'Addario's statement of claim, and said "I have faith in the judicial system and will await a ruling by the Court on our motion before commenting any further on Mr. D'Addario's allegations."

Brenda Hollingsworth, lawyer for Mr. D'Addario, told the OBJ last week that "The statement of claim speaks for itself. As to the motion (from the defendants), the technical legal argument will not prevail."

D'Addario's 14-page statement of claim narrates a complicated and rapidly-changing personal and business relationship he had with the defendants with whom he shared business interests in development properties in the Huntsville area and in EMS, where he continues to be a major shareholder.

According to his statement of claim, Mr. D'Addario had a "passing acquaintance" with the nephew for several years before the spring of 2005, when the nephew approached Mr. D'Addario seeking business advice regarding an environmental company, EcoPower, in which his aunt had invested. Their relationship progressed, and the two men subsequently formed a corporation as equal shareholders. They purchased a development property in Huntsville from the aunt, a transaction that closed last October. On business trips, Mr. D'Addario and the nephew stayed with the aunt.

On the EMS front, Mr. D'Addario alleges the nephew learned of a dissident shareholders group that was trying to oust CEO Tony Busseri and the board of directors chaired by former Ontario premier Mike Harris. During the spring of 2005, Mr. D'Addario engaged in a bitter and highly-publicized proxy battle against the current management, which he lost by a very slim margin during a shareholder meeting in April 2005. He immediately launched a court challenge of the results of the narrow vote.

Last fall the dissidents were still active and Mr. D'Addario says the nephew encouraged his aunt to join them. The aunt purchased 853,000 EMS shares for more than $300,000. If the dissidents succeeded in taking control of EMS, Mr. D'Addario claims the defendants "expected to be named as directors."

During the fall, Mr. D'Addario also says he and a company he owned loaned the nephew approximately $25,000 to be repaid by the end of December 2005. When the nephew defaulted on the loans, D'Addario filed suit on March 17, 2006 to force payment. According to court records, the parties consented to discontinue the action on July 6.

In December 2005, with suits and countersuits against EMS before the courts, 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 deal with ONCAP II that received overwhelming shareholder approval at a special meeting in March 2006.

Shortly after that deal was struck, Mr. D'Addario's statement says his relations with the defendants "became strained." He alleges the pair allied with Toronto-area businessman Roberto Sansone, president of 310 Waste Ltd., who had launched a lawsuit against Mr. D'Addario in October 2005 by filing a statement of claim that alleged Mr. D'Addario was in breach of a March 2005 "Consulting and Share Pledge Agreement." In that agreement, Mr. D'Addario purportedly agreed to pay Mr. Sansone $5 million for "soliciting shares and votes for a proxy fight." Mr. D'Addario said the aunt and nephew began "pressuring" him to "interfere with financing arrangements EMS was undertaking with ONCAP" and to relinquish half of his 8.8 million EMS shares to Mr. Sansone "presumably because they expected a benefit from Mr. Sansone."

Mr. D'Addario alleges that by early February the nephew began contacting him "repeatedly by telephone and e-mail and threatened that he and (his aunt) would take steps against him if (he) did not comply with (the nephew's) demands relating to EMS and the Sansone Action." This progressed to threats against his life, reputation and family, according to the statement.

Shortly after, Mr. D'Addario was charged with sexually assaulting the aunt on Sept. 19, 2005. The charge came the same day that Mr. D'Addario received a 12-month conditional discharge at the Huntsville courthouse for an unrelated assault charge involving two women in Huntsville, when he was on a business trip there with the nephew. Mr. D'Addario's statement of claim does not mention the Huntsville incident that led to the charge.

Mr. D'Addario claims he has "suffered anxiety, personal loss and damage arising from the humiliation and embarrassment of being under police arrest and arising from the harm or damage to his professional reputation and business."

By Jeff Esau

Special to the Ottawa Business Journal

Organizations: Environmental Management Solutions, OBJ, Ottawa Citizen Ontario Superior Court EcoPower Waste

Geographic location: Huntsville, Orillia, Ottawa Ontario Toronto

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