On the stand in Elliot Lake, owner of mall says it was doomed from start

Bob Nazarian may not deserve all the blame, but he’s certainly no victim, as Michael Friscolanti explains

<p>Bob Nazarian, owner of the ill-fated Algo Centre Mall, talks to reporters ahead of testifying at the inquiry into the mall&#8217;s collapse in Elliot Lake, Ont., on Tuesday, July 23, 2013. THE CANADIAN PRESS/Colin Perkel</p>

Bob Nazarian, owner of the ill-fated Algo Centre Mall, talks to reporters ahead of testifying at the inquiry into the mall’s collapse in Elliot Lake, Ont., on Tuesday, July 23, 2013. THE CANADIAN PRESS/Colin Perkel

Bob Nazarian, owner of the ill-fated Algo Centre Mall, speaks to reporters in Elliot Lake earlier this week. (Colin Perkel, The Canadian Press)

Bob Nazarian has boasted, plenty of times, that he’s never lost a fight. And to be sure, the 68-year-old real estate investor is no stranger to a good spat. Whether he’s negotiating a multimillion-dollar land deal, refusing to pay an electrician’s invoice or locking horns in lawsuit after lawsuit, the last owner of Elliot Lake’s doomed shopping mall plays to win. Every time.

Nazarian’s much-anticipated trip to the witness stand—13 months after his Algo Centre collapsed, killing two women, injuring many more, and triggering a public inquiry—has been no exception. His trademark defiance, his refusal to lose, is on full display.

In the eyes of many Elliot Lakers, Asadoor “Bob” Nazarian is the undisputed villain, a shrewd, short-tempered landlord who squeezed every last penny out of their only mall while ignoring repeated warnings about its crumbling structure. But to hear to him tell it during the past three days, Nazarian is yet another innocent victim of last summer’s tragedy: the honest, upstanding entrepreneur who was duped into buying a lemon of a building, then spent year after year—because he is a man of “integrity”—doing his damndest to fix the mall’s notoriously leaky rooftop parking lot. “We were working very hard on top of the roof trying to remedy the problem,” he insisted. “We were working day and night.”

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Grilled (and still being grilled) by commission lawyer Peter Doody, Nazarian has repeatedly waxed on about all the time and money he spent trying to repair the “nightmare” parking deck, how the previous owner tricked him into buying a “white elephant,” and how city officials treated him unfairly at every turn. “I have never, ever cheated anyone,” he said. “I have never did something wrong to hurt someone.” Along the way, Nazarian has pointed a finger at everyone but himself. His “sloppy” accountant. A “con-artist” former employee. Even former Ontario Premier Bob Rae (whose rent-control laws in the mid-1990s slashed Nazarian’s bottom line back when he was a residential landlord). More than once, a visibly frustrated Commissioner Paul Bélanger has instructed the witness to stop all the “embroidery” and just answer the questions.

But as hard as he tries, Nazarian can’t duck and weave from what is now obvious: although he doesn’t deserve all the blame for what happened to Doloris Perizzolo and Lucie Aylwin on the afternoon June 23, 2012—the catastrophe, three decades in the making, was a perfect storm of bad design, questionable engineering, and a collective blind eye—Nazarian is no victim. Not even close. Amid all the disturbing evidence about his company’s convenient bookkeeping and bogus construction contracts, one damning truth has emerged: Nazarian was repeatedly told by numerous inspectors that the mall’s structural skeleton may have been weakened by years of water damage. And he didn’t react to those alarm bells the way a man of integrity should.

In fact, the evidence suggests he did the absolute bare minimum, hoping to keep his bank, his tenants and the city at bay until he could sell his lemon to someone else. Even if that meant creating a fraudulent company that was supposedly hired, more than once, to fix the ill-fated roof.

A machinist who lived in Iran before immigrating to Montreal in 1971, Nazarian operated a hydraulic manufacturing company with his brother  before selling his half and moving to southern Ontario. He started to dabble in real estate in the 1980s, scooping up residential apartment buildings in Owen Sound, Guelph and Hamilton before expanding into the shopping mall market. A father of two, Nazarian owned profitable plazas in Kitchener, London and Welland before ever laying eyes on the Algo Centre, a six-hour drive from his mansion in Richmond Hill, Ont.
Doody estimated, and Nazarian agreed, that he pocketed close to $8 million in his pre-Elliot Lake real estate ventures. “Sir, what happened to that money?” Doody asked.

“What happened to that money?” Nazarian repeated, pausing for a few moments. “That’s a very interesting question.”

In the end, Nazarian couldn’t provide an answer—the first of many times he would have trouble explaining his finances. He couldn’t explain why his company’s fiscal records from 2005 said he was paid $490,000 in management fees, even though that dollar figure wasn’t mentioned in his income tax return. And he couldn’t explain why his accountant prepared four different versions of his firm’s 2009 financial statements.

Doody’s suggestion, of course, is that Nazarian was happy to fudge the figures depending on the situation. When his company applied for a property tax reduction, he submitted the version that showed a minimal profit; when he applied for a bank loan, he forwarded the higher-income calculations. Asked to explain the discrepancies, Nazarian’s answer was typical Nazarian: “I was not involved.” In other words, it was the accountant’s fault.

A friend and real estate agent first showed Nazarian the Algo Centre listing in the spring of 2005. The mall’s owner at the time was NorDev, a subsidiary of Elliot Lake Retirement Living, a not-for-profit organization that helped reinvent the once-thriving mining town into a destination for senior citizens. Nazarian met with Retirement Living officials that April, and made an offer—$8.2 million—the very same day.

“Did you ask them if there were any problems with the mall?” Doody asked.

“Yes I did?” Nazarian said.

“Do you remember exactly what you said to them?”

“I told them if there is any kind of documents, any kind of information you can give me or any defect in the mall, I would like to know now rather than later. They said that the mall is in sound situation, there is nothing wrong with that.”

As a seasoned real estate investor, Nazarian knew he had the right to dispatch an inspector to the mall. He didn’t. (“I was happy with the deal,” he said. “It was a steal.”) Even after Retirement Living agreed to lower the price—first to $7.2 million, then to $6.2 million—Nazarian said he wasn’t suspicious enough to take a closer look at the property. He actually did the opposite, agreeing to a buy the mall “as is” in exchange for the lower price.

It was only after he took possession in August 2005, Nazarian claims, that he learned about the leaky parking deck. He says he even talked to his lawyer about suing the seller, but was advised against it because Retirement Living is an influential organization “and they would not let you work and live in this town” if he filed a lawsuit. “So we closed our eyes and we tried the best that we could,” Nazarian testified.

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But the paper trail—as it does again and again—casts serious doubt on Nazarian’s version of events. Before the closing date, his lawyer was given a banker’s box full of estoppel certificates from the mall’s tenants, including one from Scotiabank that said “there have been recurrent water leaks into the premises, and wherever this is the case, the occurrence of mould is a concern.” Nazarian’s own realtor, Michael Sobhi, also wrote a letter to the Retirement Living—two months before the closing date—saying “the purchaser intends to improve the condition of the property and the parking lot in due time.”

“Did you know that there was any problem with the parking lot at the time this letter was sent?” Doody asked.

“No,” Nazarian answered.

“Where did Mr. Sobhi get the idea that there was anything to be improved about the parking lot?”

“Probably he knew a little bit more than I do?”

“Did you ask him?” Doody pressed.

“No,” Nazarian said.

Again, someone else’s fault.

By October 2006, a year after Nazarian bought the mall, the city of Elliot Lake was concerned enough about the state of the building to conduct its own inspection. Building officials slapped Nazarian with a Notice of Violation, ordering to him to have an independent engineer conduct a structural inspection of the mall’s rusty beams and file a report within two months. Nazarian waited three months just to hire the engineer, and even then, the inspection was never done. (He fired the engineer after an unrelated dispute.) Asked why he waited so long to act on the city’s order, Nazarian said he didn’t have the money. “He was not hired,” he testified. “Guilty as charged. What can I say?”

Confused, Doody returned to the subject of Nazarian’s financials. After selling one of his malls in Welland and putting his down payment on the Algo Centre, Nazarian should have been left with close to $1.8 million in his bank account. What happened to that money?

“I was drinking alcohol and I was gambling,” Nazarian sarcastically responded.

“Is that true, sir?” Doody replied.

“No it’s not,” Nazarian answered.

“Well, with respect, don’t tell me something that’s not true.”

“No, it’s not true,” Nazarian repeated. “I did not have $1.8 million. I don’t know where you are getting that from, but we were in a tight situation where we were using our line of credit in our house, and expenses were going sky high and we were constantly working on this roof—and I couldn’t fix it.”

The truth, Nazarian eventually conceded, is that he felt unfairly targeted by the city, which suddenly “woke up” after he arrived in town and “dumped everything” on him. “This leak was continuing for over 30 years and nobody issued any violation order,” he said.

By 2008, the drips had intensified, tenants were threatening to leave, and his mortgage provider, the Royal Bank, was contemplating default unless specific repairs were completed. Nazarian’s response over the next few months was desperate, confusing, and at times, seemingly illegal.
He hired John Clinckett, a Kitchener-based architect, who came up with a plan to install a waterproofing membrane topped with a thin layer of asphalt. An April 2008 issue of the local newspaper featured a story about the planned repairs, saying the work would begin in a couple weeks. But Nazarian had yet to sign a deal with the contractor—and he never did, because the contractor pulled out after Nazarian refused to pay for materials. But none of that was mentioned in the article. As far as the average reader could tell, a major fix was finally afoot.

When that plan fell through, Nazarian made what he now describes as a “terrible mistake.” Hoping to obtain funds from ELNOS, a local organization that provides business loans, Nazarian’s “dear friend” Alexander Sennett—an I.T. specialist with zero experience in the construction industry—incorporated a new company: Empire Roofing and Restoration Inc. Nazarian was listed on the company’s bank account, but he insists the scheme was all Sennett’s idea and he was “ordered” to play along. “Blindfully, I trusted my friend,” Nazarian said.

On June 16, 2008, Nazarian’s company signed a contract with Empire to repair the mall’s roof. “I suggest to you the contract you signed with Empire Roofing was never intended by you to be a real contract, but was simply a sham to obtain financing,” Doody said.

“I would not call it that, sir,” Nazarian answered. “That is your statement.”

Amazingly, Nazarian said he believed the contract was legitimate at the time, and that Empire was somehow going to fix his parking deck. Only now, he says, does he realize the truth: it was all Sennett’s fault. “I made a terrible mistake by going into that trap.” (For the record, Sennett already testified that Empire was all Nazarian’s idea, and he just did what he was told. To which Commissioner Bélanger responded: “This looks to me to be a complete fraud.”)

Bolstering that assumption is what happened next. Just six days after the Empire contract—a contract Nazarian insists he believed was legitimate—he entered into another deal with a roofer named Glen Day, based in Newmarket. How, Doody wanted to know, can you have multiple contractors doing the same job? “It shows how active we were and how perseverance we had to fix that roof,” Nazarian said.

Glen Day, like so many of Nazarian’s decisions, turned out to be an utter disaster. Jackhammers in hand, Day’s crew ripped up so many portions of the rooftop parking lot in the summer of 2008 that when it rained, some of the stores below may as well have been outdoors. When Nazarian sped north to Elliot Lake to assess the damage for himself, he was floored. “It was a fiasco,” he testified. “It was a shower all over the mall. I was so upset. There was a big chance I could have a heart attack.”

He fired Glen Day on the spot.

As fate would have it, Day was fired the very same day another inspector showed up at the mall, this one commissioned by the Royal Bank to check on its investment. “There has been a marked deterioration in the property over the last year,” the inspector wrote in his subsequent report. “All spaces below the parking deck have severe leaks and the water damage is extensive, causing structural and mold issues, let alone strained relations with many tenants…Many structural issues are present due to the water leakage issue and [a] formal engineering study is required on the integrity of the structure.”

Add the city’s Notice of Violation, issued two years earlier, and the report marked the second time Nazarian was told to have an engineer check the structural integrity of his mall. Again, he didn’t do it. “I don’t remember, really, what we do at that date,” he said. “I know that it was very much concern. As you know, right from the beginning, we knew about these tenants’ concerns and we would do anything to satisfy them.”

At the right price, of course. Near the end of Thursday’s testimony, Nazarian’s third straight on the stand, Doody managed to pry the most telling response from his witness. He was asking about a Richmond Hill townhouse survey Nazarian built and sold in the summer of 2009, profiting more than $2 million. He used the money to buy two more pieces of land on north Yonge Street, which he hopes to develop into eight-storey condos.

“Why didn’t you use that money to fix the roof?” Doody asked.

Nazarian seemed shocked by the suggestion. “The Algo Mall was a black hole, no matter how much money you put in,” he said. “Even before I purchased it, that mall was doomed.”

What moron, in other words, would have spent a penny more than he had to? As Nazarian said, he’s not in the business of throwing money “down the drain.”

Nazarian is back on the stand Friday morning. His investment in Elliot Lake isn’t finished just yet.

Michael Friscolanti spent months chronicling the events that contributed to the tragedy at the Algo Centre. His findings appear in our new ebook: Doomed: The Untold Story Behind the Collapse of the Elliot Lake Mall, which is available here.