A piece of heaven turned to hell

A piece of heaven turned to hell
Kate Allen
Staff Reporter

Very slowly, the sisters approach the building that has caused their financial ruin.

Joyce Williams, 70, and Pat McLaughlin, 63, have come in Williams’ rusting minivan. They peer into the windows of their former church in Scarborough, where the gold satin drapes still hang askew.

“Puts a knot in your stomach,” says Williams.

Later, McLaughlin clutches her sister’s hand at a Tim Hortons down the road as Williams recounts their ordeal, her eyes brimming with tears. The saga began with a pastor they trusted too much, turned south with a real estate investor who owes tens of millions to casinos, and now rests in the hands of a man who claims he could bankrupt them at any moment.

Because of what they invested in a church they thought would help others, the sisters, their children and other parishioners are in danger of losing their own homes.

The pastor, Hilary Salmon, denies any wrongdoing, claiming her parishioners collectively agreed to pursue church group’s vision. The real estate investor, Semion Kronenfeld, says he’s not responsible for his gambling debts.

Broke and lawyerless, the sisters cling to their Christian faith, and their bond with each other. “That will never shake,” says Williams.

What turned hellish at first looked like a golden opportunity. In 2007, Salmon, the pastor of Greater Works Ministry, a Pentecostal congregation that was renting service space, approached Williams and McLaughlin with a vision: she wanted to buy a church. Salmon is also a licensed real estate agent.

Though the sisters did not attend her church, Salmon had been extremely close to Williams’ and McLaughlin’s mother, Daphne, before Daphne died 10 years ago. Many mornings since then, Salmon joined the two sisters in prayer over the phone.

So when Salmon presented the idea of a community that would include youth outreach — a pet cause of McLaughlin’s — along with a daycare centre, a restaurant and space for Sunday services, the sisters were enthusiastic.

Then Salmon asked the sisters to help out financially. Williams is a retired nurse living off her pension. McLaughlin is a house cleaner. They balked at first. “Oh my god, I don’t have any money!” McLaughlin remembers telling Williams.

But eventually, both relented — a decision they now call “foolish.” They assumed they would be paid back in due course.

“We thought we could be of service, or help, to others,” says Williams. “But now, in retrospect, we think: how did we get here?” Williams remortgaged her Scarborough house, and the sisters tapped lines of credit, credit cards and an accident insurance payout to lend $50,000.

Another parishioner, June Douglas, says Salmon asked her to borrow $100,000 for the church: “She called me to tell me what the Lord is doing, and asked if I could help,” says Douglas, 47.

Douglas is a single mother of four who had quit her job because her dementia-stricken mother needed full-time care. Though Douglas was already borrowing $30,000 to put her mom in a nursing home, she eventually gave Salmon what she wanted.

“She just kept pulling — it’s like a magnet,” says Douglas. Salmon said she would provide the monthly payments for both loans.

Salmon did not answer questions posed to her by the Star, responding only that the allegations presented in this story are “falsified.” Previously, in response to a lawsuit brought by Douglas, she said that she, too, suffered financially after borrowing more than $100,000 to finance the church. She also said that she did not call Douglas to ask for a loan, and that the loan was “voluntary.”

The parishioners’ money was plunged into the down payment on their church-to-be, a huge, one-storey strip of brick at 430 Tapscott Rd. in Scarborough.

Since 2006, the property had belonged to AJGL Developments, a North York-based real estate development company. The president of AJGL, Semion Kronenfeld, was a man of extravagant tastes.

Kronenfeld lived in a gated, nine-bedroom, $4-million dollar mansion in North York with a driveway big enough to park his small fleet of luxury cars: a Rolls-Royce Phantom, a Ferrari Spider and two S-Class Mercedes-Benzes, among others. He was also part owner of two condominiums.

According to one casino executive, Kronenfeld, 40, wore white Louis Vuitton shoes, collected expensive watches and liked to smoke cigars.

Blackjack was his game of choice. Says Vincent Salvatore, an occasional business associate and acquaintance of Kronenfeld: “He was a whale. He was a big gambler.”

Kronenfeld was selling the 46,000-square-foot Tapscott property for $3.7 million.

The ministry was given a conventional mortgage, but it covered only $2.3 million of the purchase price. So Kronenfeld offered a vendor take-back mortgage, a type of private loan offered by the seller of a property to the buyer.

There was one condition: Kronenfeld would only provide a $1.25 million mortgage if the group offered five properties as collateral. Under pressure from Salmon, Williams and McLaughlin say, they both agreed to include theirs. Their children (both have two sons), who own the homes on paper, agreed to the deal.

After resisting, Douglas caved and agreed to add hers last-minute — she says Salmon told her church members could lose all the money they had already invested. Another couple who knows Salmon agreed as well. Salmon herself put up one of her properties, in Markham. She owns another on tony Balliol St. in downtown Toronto.

The mortgage didn’t seem risky because of one crucial detail. As a condition of the sale, Kronenfeld guaranteed Greater Works Ministry a five-year lease for an appliance business that was renting half of the building, an arrangement that would supply the church with thousands of dollars in income.

So, every month, when the ministry wrote Kronenfeld a cheque for $10,417 in mortgage payments, it would receive more than $15,000 in rent payments. The ministry could put the extra money towards its mortgage payments to the bank.

However, the balances on both mortgages were due in a year, not uncommon in commercial real estate. How Salmon planned to come up with the money by then is unclear.

The deal closed on Aug. 8, 2008, with Salmon acting as the agent for the ministry. Salmon’s former brokerage, ReMax Crossroads Realty, confirmed that she received a commission of $74,000 on the sale. (She was terminated from the brokerage last month for lagging sales, the branch manager said.)

That very same day, according to legal documents, Kronenfeld went to Casino Niagara and Niagara Fallsview Casino and took out a $1 million line of credit.

The ministry moved in and, for a few months, the community grew. The sisters attended prayer meetings, breakfasts and services. Williams and McLaughlin say Salmon asked for more money to renovate the space. They loaned another $50,000.

Then suddenly, in the fall of 2008, the rent cheques stopped appearing. Salmon called a meeting to say that the appliance business had moved out. Without the extra income, the church group began struggling to make their monthly mortgage payments.

What no one knew was that in a matter of months, Kronenfeld had racked up millions of dollars in betting debts while living the life of a high roller.

According to charging documents in the U.S., bankruptcy files in Ontario and lawsuits filed by casinos, between August and November of that year Kronenfeld jetted across North America, allegedly piling up debts at a different casino nearly every weekend.

Kronenfeld’s lawyer, Stanley Rosenfarb, told the Star that neither he nor his client was interested in commenting for this story. In statements of defence to the casinos’ lawsuits, Kronenfeld denied responsibility for the debts, in part because he claims the casinos did not advise him to obtain legal advice when he entered into credit arrangements.

The same week that the Tapscott deal closed, Kronenfeld took out the $1 million line of credit in Niagara Falls plus another $1 million line of credit at Casino Rama.

In September, he was in Las Vegas, where he lost $1.2 million at the MGM Grand and $700,000 at Caesars Palace.

In October, Kronenfeld gambled $5 million over two days at the Trump Taj Mahal in Atlantic City. Kronenfeld claims he was induced to gamble because casino executives lavished him with limousines, private jets and a diamond watch for his wife (the casino denies this). Later that month, he was in Las Vegas again, gambling away $7.9 million at the Venetian and another $5 million at the Green Valley Ranch casino.

In November, he lost $2.1 million at the Niagara casinos and Casino Rama.

By the New Year, his lifestyle was crumbling. Casinos were after him for $21 million.

The Taj Mahal, the MGM Grand, Casino Rama and the Ontario Lottery and Gaming Corp., which operates the Niagara casinos, were all suing him, claiming he failed to repay his debts. A warrant for his arrest was issued in Nevada after two Las Vegas casinos brought cheque fraud charges against him.

His bank, RBC, also sued him and froze his account after he allegedly deposited two cheques in December 2008 worth $1.1 million and immediately wired the money to a Swiss bank account before the cheques bounced. In his statement of defence, Kronenfeld states he was just as shocked as the bank when the cheques were dishonoured. He denies he defrauded RBC.

In February 2009, Kronenfeld filed for bankruptcy. His list of creditors includes, besides the casinos and RBC, vehicle leasing companies for eight different cars, $7,000 at Best Buy and hundreds of thousands in credit card debt. His nine-bedroom mansion and two condominiums were sold off. He claims that he and his wife separated and he moved in with his sister — although, in an unrelated lawsuit, Kronenfeld states that nine months after his bankruptcy filing he and his wife were living in a rented five-bedroom mansion when it caught fire and burned down. The owners of the house are suing the couple for $3 million; Kronenfeld and his wife deny responsibility.

The church group, meanwhile, fell into default on their mortgage, and the situation quickly deteriorated. In early 2010, Salmon reneged on her promise and stopped paying for the $100,000 loan Douglas had taken out for the church. The Tapscott property was seized by the bank and sold, which paid off only the first, conventional mortgage. In June, the church members were mailed warning letters noting that they were in default on the second mortgage, and that power of sale proceedings would be issued on their homes imminently.

But the letters came from a company they had never seen before: Vincorp Financial.

Unbeknownst to the church group, in November 2008 Kronenfeld sold the second mortgage on 430 Tapscott Rd. to a company called Vincorp Financial.

Vincorp’s president is Vincent Salvatore, Kronenfeld’s business associate. Salvatore told the Star they had also been on gambling trips together.

On the same day that the Taj Mahal sued Kronenfeld for $5 million, the casino also filed a complaint against Salvatore, claiming $3.5 million in unpaid gambling debts. In his statement of defence, Salvatore says he was at the casino on a trip arranged by Kronenfeld, and those millions were actually gambled by his friend, who is therefore liable for the debts.

Salvatore says he bought the Tapscott mortgage from Kronenfeld for $1.3 million. “I guess he needed the money,” Salvatore says.

Salvatore, 62, told the Star their relationship soured after Kronenfeld went belly up. “Kronenfeld screwed me too,” says Salvatore. According to records, when Kronenfeld declared bankruptcy, he owed $100,000 to a company called Salvatore Empire Investments, whose president is Salvatore’s wife.

The fate of McLaughlin, Williams, Douglas and the other church members is in Salvatore’s hands, he says: “Right now I actually can bankrupt them.” But he notes that he paid $1.3 million for the Tapscott mortgage. As it stands, if he collects on all five homes tomorrow, he still won’t make that back, because the equity in the properties is probably around $400,000.

“I really feel bad for the people. That was my main concern right from day one. People like them should not lose their houses,” Salvatore says. But, he adds, “I can’t walk away from a million three (thousand dollars) . . . that money is my family’s money.” Salvatore says he is open to negotiating a new payment plan.

“Who created the problem was Hilary (Salmon) . . . by getting into a deal that was too big for her,” he says.

“I trusted her, we all trusted her,” says Douglas. “It almost destroyed me.” For more than a year now — since Salmon abandoned her promises of repayment — Douglas has been forced to use her mother’s monthly pension cheques to pay down ballooning interest on the $100,000 loan. She can’t afford to put her mother in a nursing home anymore.

Douglas filed a lawsuit against Salmon but later dropped it when she, Williams and McLaughlin retained a lawyer, hoping to bring a larger lawsuit against their former pastor. But the group abandoned that plan when the legal bills became too much for them. They would like to pursue further legal avenues, but their finances won’t allow it.

The sisters both say that Salmon had good intentions. But Williams adds: “I really trusted her that everything was going to be okay, and she knew what she was doing. But when I look back at it, the fact that she’s a leader . . . to bring us through this, that was the hardest part.”

The knock at their doors could come any day.

“We’re just trusting God,” says Williams.


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VIDEO: Church deal goes wrong for sisters


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Cast of Characters

Semion Kronenfeld

• Born in Soviet Union, raised in Israel and moved to Canada as a teen, according to bankruptcy documents.

• Married, 40-year-old father of four, including two from previous marriage.

• Established successful investment real estate business and lived a lifestyle to match, with nine-bedroom mansion, part ownership of two condominiums and fleet of luxury cars.

• Former president of AJGL Developments, and was the president of Electronic Liquidators, which declared bankruptcy in 2008. He is listed as an “incorporator” of the numbered company that rented the appliance business space at 430 Tapscott Rd., and which also shares the same address as AJGL Developments.

• Declared personal bankruptcy in February 2009, blaming the global recession. He also claims his gambling debts — more than $21 million, according Kronenfeld’s list of creditors — were brought on due to “extravagant and constant incentives” provided by casinos.

• Bankruptcy documents include testimony from two addiction counsellors he has visited since 2010. But according to one, Dr. Albert de Goias, Kronenfeld “did not have a gambling addiction. He had a lifestyle addiction.” Kronenfeld has signed up for the Ontario Lottery and Gaming Corp.’s self-exclusion list.

Hilary Salmon

• Pastor of Greater Works Ministry, a Pentecostal congregation, and also a licensed real estate agent.

• In 2008, led a group including Joyce Williams, Pat McLaughlin and June Douglas to purchase 430 Tapscott Rd. for the purpose of establishing a church.

• Says she borrowed $100,000 off the value of her home to finance the church. She also collected a $74,000 commission on the purchase of 430 Tapscott Rd, according to her former brokerage.

• Owns two houses, one of which is collateral for the $1.25-million mortgage the group took out with Kronenfeld.

Vincent Salvatore

• The 62-year-old says he buys and sells mortgages for a living.

• He and his wife, Elena, run several companies between them, including Vincorp Financial, Salvatore Empire Investments, Bostion Inc. and Arnach Inc.

• Says he brought Kronenfeld’s mortgage on 430 Tapscott for $1.3 million.

• Says that when the mortgage first went into default, he advised Hilary Salmon to sell the Tapscott property and release the five homes attached as collateral, but she did not.

• “I’m waiting for a miracle,” says Salvatore of efforts to collect on what he is owed.

Joyce Williams, Pat McLaughlin,

June Douglas

• Three women were all part of group that put in money for down payment and renovations on 430 Tapscott Rd.

• Williams, a retired nurse, and her sister McLaughlin, a house cleaner, together provided $100,000, part of which came from Williams remortgaging her home.

• Douglas, a single mother of four, borrowed $100,000 for church down payment. Salmon, their pastor, promised she would make the monthly payments on the loan.

KATE ALLEN

THE DEAL

• AJGL Developments, Semion Kronenfeld’s company, sells 430 Tapscott Rd. to Greater Works Ministry for $3.7 million on Aug. 8, 2008.

• Greater Works makes a down payment of $150,000.

• The church’s first, conventional mortgage is for $2.3 million. Monthly payments are $23,000, with the balance due in a year.

• Kronenfeld provides the group with a second, “vendor take-back” mortgage for $1.25 million. Monthly payments are 10 per cent, or $10,417, with the balance due in a year. Five homes are included as collateral.

• The church’s income includes more than $15,000 monthly from an appliance business renting half the Tapscott property — Kronenfeld “indemnified”, or guaranteed, that lease as a condition of the sale — and thousands of dollars from charitable donations.

• In November 2008, Kronenfeld sells the second mortgage to Vincent Salvatore for $1.3 million.

• When the church falls into default on its mortgage payments, the Tapscott property is seized by the bank and sold for $3 million, paying off only the first mortgage.

• The second mortgage, now belonging to Salvatore, is still outstanding, and the $1.25 million lien still stands on all five homes, including pastor Hilary Salmon’s. The equity on the homes amounts to far less than that figure, however.