Billionaire Michael DeGroote's casino dream turns into organized crime nightmare
Late Mafia godfather Vito Rizzuto muscles his way in on Caribbean gambling venture
By Zach Dubinsky, University
One of Canada's richest men, a philanthropist and an officer of the Order of Canada, poured $112 million US into a gambling venture headed by three businessmen with ties to organized crime, and is now locked in an international fight over Caribbean casinos with links to one of Canada's most feared Mafia clans.
Michael G. DeGroote, who has the business and medical schools at Hamilton's McMaster University named after him, and who has been lionized as a self-made billionaire philanthropist, lent the money to a trio of men from the Toronto area to create a chain of gaming facilities in Jamaica and the Dominican Republic.
By May 2012, the billionaire's total underwriting of the Caribbean operations stood at $111.9 million US. "I am not an owner of Dream. I am strictly a creditor," DeGroote later said in sworn testimony.
By their own account, the Carbones worked day and night to turn their newly acquired Dominican Republic casinos into a chain of glittering gaming houses worthy of Las Vegas. "A lot of hard work, lot of hours... leaving our families, seven days a week," Francesco Carbone said.
The Lamborghini-driving brothers threw promo events featuring models and Dominican celebrities, took out splashy newspaper ads and gave away cars.
And at first, Dream Group was making good on its loans.
But then, in May 2012, the payments to DeGroote stopped.
After a summer of haggling, in October, DeGroote sued to get access to the company's books and to get his money back, alleging the Carbones and Pajak had misappropriated portions of the funds. One judge ruled in November 2013 that DeGroote had established "a strong case" for fraud.
And as the lawsuit unfolded, so did the Carbones' and Pajak's history.
Handgun convictions
It turned out this was not the first time the Carbones had been sued over large debts. Before Dream Group, they ran a house-painting business and a cigar-importing company. Both were pursued by banks over unpaid loans, and both had receivers appointed who found serious flaws in the companies' books, according to court filings.
The provincial government had pursued them as well, raiding the cigar business in 2009 on suspicion it was underpaying tobacco tax. During the raid, police found two handguns — one in Antonio Carbone's filing cabinet, the other under Francesco Carbone's desk, loaded and with the serial number filed off.
The brothers pleaded guilty in July 2011 to illegal possession of firearms and were sentenced to 60 days in jail. In interviews with the CBC, they admitted it was a "terrible idea" to acquire the guns, but said they had received threats — five bullets in the mail and an accompanying note — and wanted to protect themselves and their families.
There is also evidence they were involved in a bookmaking operation linked to organized crime.
The Carbones deny it, but the investigation by CBC and the Globe and Mail found corporate filings from Panama, Costa Rica and Britain, as well as court and website records, which indicate the brothers were behind an online gambling website called Don Carbone Sportsbook and Casino, or DCSC.com. Banking records show they wired at least $245,000 from their tobacco company's bank account to DCSC in 2008.
Until it closed shop in 2010, DCSC was affiliated with a wider bookmaking network called Platinum Sportsbook, which police took down in February 2013 in a series of raids in southern Ontario. Investigators have publicly described Platinum as a joint undertaking of the Hells Angels and Italian Mafia.
As for Pajak, DeGroote has said he's been friends with the 62-year-old businessman for over 40 years.
Pajak has no criminal record, but four former investigators — two from the RCMP, two from Toronto police — said he has a history of association with known Mafia figures, with one of those investigators describing him as "a mob associate of the first degree."
In a secret recording filed in court by the Carbones as part of litigation over the Dream Group, he is heard saying that "I used to take care of all, a lot of the mob's money."
While DeGroote's legal battles with the Carbones progressed in the first half of 2013, other characters with a dubious past entered the fray.
In May of that year, DeGroote was visited by two men at his family's luxury condo in downtown Toronto.
One of them was Peter Shoniker, an outgoing, white-haired former Crown attorney who had been convicted of money laundering in 2006 after he became caught up in an RCMP sting. Shoniker had been hanging around the Dream Group's Toronto offices for most of the prior year, and came to believe the Carbones were swindling DeGroote.
Vito Rizzuto at Caribbean casino
On Aug. 14, 2013, a security camera at a Dream casino in Punta Cana filmed none other than Vito Rizzuto, once the most powerful mob boss in Canada. (CBC)
The other was a large, broad-chinned man introduced as Alexander Visser.
Unbeknownst to DeGroote, Visser had a long criminal history, amounting to more than 40 convictions in Canada for fraud, uttering threats and assault.
The justice system knows him as Zeljko Zderic, 44. But he also kept passports from various countries under the names Sasha Vujacic and Pavle Kolic, and had ties to a series of mobsters.
At the meeting, Visser made a stunning offer, according to secret audio recordings he made that have been filed in court by the Carbones.
He said he could get Dream employees in the Dominican Republic to sign affidavits claiming the Carbones had massively defrauded DeGroote, but for a price.
"You pay me half a million you're going to get all that. You have my word," Visser said. "I am going to make sure that the Carbones can't even sell chestnuts on the corner of the f—king street."
Initially, DeGroote objected, saying "I cannot buy evidence." But eventually he began negotiating over the asking price, according to the tapes.
They settled on $500,000 — $250,000 for Visser, and another $250,000 to pay the Dream employees' back wages. By the end of the meeting, however, DeGroote again had doubts and said he would first check with his lawyer.
The next day, he retracted the offer.
He nevertheless told Visser he would send him $150,000 with "no strings attached" for possible future help.
DeGroote declined to be interviewed by CBC and the Globe and Mail, but through his lawyers, he said the secret recordings were manipulation, created by "individuals with a long history of practising deceit."
He has also testified under oath that he never actually sent any money to Visser.
But he acknowledged that Visser did end up working for the Dream Group in the Dominican Republic.
Visser flew there in July 2013, and soon began making death threats against the Carbones and one of their associates.
Security footage from around that time shows him walking the floor of a Dream casino in Punta Cana. He's accompanied by none other than Vito Rizzuto, who until his death later that year was the godfather of the Montreal Mafia and one of the most powerful mobsters in Canada.
Rizzuto had a long history in the Dominican. For years, Canadian police compiled evidence that his Mafia clan was using the island to ship drugs to Canada. Testimony at Quebec's Charbonneau inquiry into municipal corruption revealed the godfather often went to the DR to golf and vacation.
The battle over Dream Casinos turned violent. On Dec. 19, 2013, armed men stormed the headquarters in Santo Domingo. Among those repelling the assault was Rizzuto associate Gianpietro Tiberio, seen here in blue delivering a blow.
The Carbones claim that this time, however, he was there as part of an effort by their partner Pajak to take over their company.
Starting that fall, Rizzuto began to have a series of meetings at the tony Casa de Campo community in the eastern Dominican, according to two sources who were present. The meetings were also attended by Visser and Dream Casinos president Pajak, the sources said.
Peter Shoniker, who had flown down to the country and partook in some of the gatherings, said that the men discussed what to do about Dream and the Carbones — and that he was astonished to discover at one discussion that the Mafia godfather would now have a substantial involvement in Dream.
"I recall Mr. Rizzuto saying that, you know, somebody's gotta get this all approved by Mike DeGroote. At which point in time Andy Pajak said, 'I speak for Mike DeGroote,'" he said.
"It was after that conversation that Mike DeGroote called me and said, 'Peter, what the hell is Vito Rizzuto doing involved in this?' I said, 'Why don't you ask your boy Pajak? He's staying at his house.'"
Through the fall, a number of Rizzuto henchmen showed up in the Caribbean.
They included Stacey Richard (Rick the Russian) Krolik, convicted in 2010 for his role in a Rizzuto clan online gambling operation, and Gianpietro Tiberio, who has no criminal record but was named in the Charbonneau commission as an "organized crime figure." Tiberio even attended court representing Dream Casinos and showed up at a radio interview about the company.
Tiberio's lawyer Franco Schiro called CBC News on Friday afternoon to say that while his client met Vito Rizzuto in the Dominican Republic, he was never an operative for the Rizzuto clan. Schiro added that Tiberio was doing legitimate business for Dream Casinos and that he acted as "a management consultant" and met "all sorts of people."
Back in Toronto, in November, Antonio Carbone got an ominous phone call, he claims.
"I was contacted by an individual to attend a meeting. The individual told me that Vito Rizzuto was in Toronto, and he needed to speak to me urgently, and it was in my best interest to meet with him," Carbone said in an interview.
The ensuing meeting was held at a steakhouse north of Toronto, Carbone claims. He maintains Pajak also attended, as well as a number of other Toronto-area men affiliated with Rizzuto.
"He was brought in to intimidate us. And when the time was right that we were putting up a fight, Rizzuto presented himself and told me to walk away, or else," Carbone says.
CBC asked DeGroote, the billionaire who had lent a fortune to the Dream venture, about the involvement of Rizzuto. His lawyer answered: "Mr. DeGroote has never met Mr. Rizzuto, has never spoken to him and has never had any association with him of any kind."
There were many signs by that Christmas of organized crime involvement in the Dream Casino business. DeGroote, however, continued to pour money in, lending a further $2.4 million in "emergency funding" to Dream, which two separate court-appointed supervisors have reported is in financial distress.
His lawyer said in a statement that DeGroote has never "been complicit in members of organized crime becoming involved in any of his business affairs."
The Carbones are adamant they will prevail in court, oust Pajak and retake control of the casinos.
They have also countersued DeGroote and Pajak, alleging a conspiracy to sabotage the Dream venture.
Sasha Visser remains a fugitive from Canadian justice and still has business in the Dominican Republic.
As for the billionaire investor, for his part, he rues ever advancing a single cent to the Caribbean endeavour.
In his only on-the-record statement about the Dream fiasco, issued through his lawyers, DeGroote said: "Frankly, I sincerely regret that I ever agreed to invest in this venture. Indeed, I am embarrassed by it."
His lawyers later added: "Mr. DeGroote is someone who has been wronged, rather than a wrongdoer."
Bad Dream The Casinos, the Mob and the Missing Millions
Published January 23 2015
The Globe and MailPublished January 23 2015
It was a vision to cap a remarkable career. Deal-making smarts had taken Michael DeGroote from hardscrabble immigrant roots in Ontario farm country to the stature accorded a billionaire and benefactor par excellence.
His new venture, hatched in his late 70s, was to invest in Dream Corporation, whose partners were bent on founding a new Las Vegas in the Dominican Republic.
But those partners became more interested in squeezing each other out than in running the business. Things turned violent. Soon, Mr. DeGroote's millions were gone and his dream had turned into a nightmare.
By Greg McArthurPublished January 23 2015
When Michael DeGroote stepped up to the lectern at McMaster University last May 23, he cemented his position as one of Canada’s most generous philanthropists. In his distinct gravelly voice, the now 81-year-old billionaire, who made his fortune in trucking and waste management, announced to a graduating class of medical students that he was giving their school another $50-million – bringing his family’s total contributions to the Hamilton university to more than $175-million.
The surprise announcement sparked gasps, whistling and a standing ovation.
But at the same time as Mr. DeGroote was being heralded for his largesse, thousands of kilometres away another of his investments was caught up in an entirely different commotion: mounting evidence that the philanthropist had been defrauded, and an underworld war involving Canada’s most powerful and feared Mafia family.
In 2011, Mr. DeGroote served as the sole investor in a casino company trying to capture a swath of the gaming industry in the Dominican Republic. There were three owners of that company, Dream Corporation, and when relations between those three deteriorated, the Mafia inserted itself into the conflict, a joint investigation by The Globe and Mail and CBC’s the fifth estate has found.
This battle erupted in a number of ways, in the form of lawsuits filed in Ontario Superior Court and violence in the streets of Santo Domingo, the Dominican capital.
Video and audio evidence, as well as interviews, show that as the dispute escalated, Vito Rizzuto, the godfather of the Montreal Mafia, inserted himself into the affair, and members of his criminal network helped protect and manage the casino chain.
Mr. DeGroote, who responded to questions through his lawyers, said that he was not complicit in any way in the involvement of the Mafia into the dispute. And there is no suggestion he was.
The philanthropist has never had “any association of any kind” with Mr. Rizzuto, his lawyer William McDowell said in a Jan. 13 letter.
In 2012, Mr. DeGroote launched a lawsuit against the owners of Dream – brothers Antonio and Francesco Carbone, and Andrew Pajak – alleging they misappropriated portions of $112-million he lent for the acquisition of more than a dozen casinos, about 200 sports betting parlours and 1,100 lottery terminals. Several Ontario Superior Court judges have ruled in favour of Mr. DeGroote and the many motions he has filed as part of the suit. Mr. Justice Frank Newbould declared in November, 2013, that the trucking magnate has “established a strong case in fraud” against the Carbones and Mr. Pajak.
“Mr. DeGroote has been targeted by a series of unscrupulous people, as the court decisions reflect,” his lawyer said. “He has been the victim of wrongdoing at every stage of this matter.”
In a bid to demonstrate that they have been miscast as the villains in this plot, the Carbone brothers have mounted an aggressive defence. Armed with surreptitiously recorded audio, surveillance footage, e-mail and other documents, they’ve launched a scorched-earth litigation strategy. Two judges have deemed their recordings inadmissible and unreliable. Another has called them irrelevant to their defence of Mr. DeGroote’s claim of fraud.
Through interviews with a combination of sources – including organized-crime experts, individuals in the Dominican Republic, officials from Dream Corporation, and some criminals – The Globe and Mail and the CBC have corroborated key information contained in the recordings. What that information shows is the ways in which the Mafia exploits conflict, and how organized crime intersects with business.
The story of Dream Corporation is a complex case study in the power of capital and the perils of venturing into high-risk jurisdictions in search of profit. It is also a cautionary reminder that there is far more at stake in an investment than simply making or losing money.
The Dominican Republic has all the characteristics – lax regulations, poor law enforcement, corruptible public institutions – that make for a hazardous business environment. But the country, which shares an island with Haiti, has another distinct feature that renders the gambling industry that much more dangerous: a selection of Canadian Mafiosi who consider the Dominican a second home.
The Deal
“Whatever they’re telling you [inaudible], I raised all the capital.”— Andrew Pajak recorded by Boghos Alexanian
Part 2
The story of Dream Corporation starts with a wedding and a godfather – but not that kind of godfather. It was at the marriage of his goddaughter in the fall of 2010 that Mr. DeGroote ran into Andrew Pajak, a man he had called a friend for 40 years.
In the 1980s, when Mr. DeGroote was already a well-established titan of Canadian business, Mr. Pajak was a high-rolling real-estate developer who was married, at the time, to a former Miss Toronto.
But now, Mr. Pajak explained, he had moved into the gambling business. He was working for a gaming-technology company with two brothers, Francesco Carbone, who is now 47, and Antonio Carbone, now 39. The trio were manufacturing sleek, screen-based gaming machines designed to offer much more than the passé thrill of pulling a slot-machine handle.
The company had already identified an opportunity in Jamaica. A nightclub and gambling facility, the Vegas Flamingo, was on the cusp of opening in Montego Bay, and the Carbone-Pajak team was hoping to fill it with its machines.
After touring the trio’s Toronto-area office and visiting Jamaica with his chief financial adviser, Mr. DeGroote was convinced they were on to something; he provided their company with a $5-million loan on Dec. 1, 2010.
It was not uncharacteristic for Mr. DeGroote to latch onto shiny new investment opportunities. As Canadian Business magazine once put it, “DeGroote’s real love – and talent – is buying more companies.”
Mr. DeGroote, who emigrated from Belgium with his family as a teenager, dropped out of high school to work on tobacco farms in order to help support his family. In his 20s, he bought a small trucking outfit, Laidlaw Inc., which he gradually built into a $5-billion company with school-bus and waste-disposal operations as well as its original business. He sold his stake to Canadian Pacific in 1988 for $500-million.
Laidlaw itself, built by a string of acquisitions, illustrated Mr. DeGroote’s love of the deal. Over the decades, he has also sunk capital into the taxi industry, the CFL’s Hamilton Tiger-Cats, home-security systems, a trust company, car dealerships, and oil and gas exploration. He collects companies the way some people collect stamps. In a 1997 interview with the Financial Post, he compared his latest venture at the time to owning an animal. “I love it,” he said. “It’s great to have pets to play with.”
By the time the opportunity presented by Mr. Pajak and the Carbones came up, Mr. DeGroote might have been content to rest on his laurels. Long having resided in Bermuda, he had been made an Officer of the Order of Canada in 1990 and, via his first large donation to McMaster, become the first person to put his name on a business school in Canada, in 1992. And he’d had headaches too: In 1993, he and others had paid $23-million to the Ontario Securities Commission to settle allegations of insider trading of Laidlaw shares. There was no admission of wrongdoing.
Yet Mr. DeGroote not only went for the gambling play in 2010; he quickly upped the ante. His initial returns were good, and he made further investments. The revenue reports he received from Jamaica showed that the machines generated profits of $1.7-million in their first four months of operation.
A little more than a month after the Vegas Flamingo opened, Mr. DeGroote and the trio turned their attention to the Dominican Republic, setting their sights on full-service casinos. Despite suffering from a chronic pain condition that he likens to “living in hell,” Mr. DeGroote braved the Dominican Republic’s notoriously dangerous and unmaintained roads in January, 2011, with Antonio Carbone to scout possible acquisitions.
Shortly after, the Carbones and Mr. Pajak formed the Dream Corporation and went on a shopping spree. They bought all kinds of casinos: beachside gambling houses that feature a few card games and a handful of slots, as well as full-sized casinos outfitted with all manner of wagering. All this was financed with Mr. DeGroote’s money, which he sent to the trio in instalments, in exchange for interest payments and a share of the profits.
“I am not an owner of Dream. I'm strictly a creditor.”— Michael DeGroote cross-examination (p. 138)
The structure of the deal kept Mr. DeGroote at a distance from the company. Even though Mr. DeGroote was the sole investor, Mr. Pajak and the Carbones were the owners. “I am not an owner of Dream. I am strictly a creditor,” he would later say in a cross-examination.
Nevertheless, Mr. DeGroote was in dangerous territory. His money was being used to purchase assets from questionable businessmen. Among them was a Dominican national who had once been indicted by the U.S. Drug Enforcement Agency for his alleged role in laundering the profits of a Mexican drug cartel.
Money laundering – taking the profits from crime and funnelling them through another business to make them appear legitimate – is rampant in the Dominican Republic. A year before the Carbones and Mr. Pajak began snatching up casinos, a U.S. State Department official warned that the country was stumbling toward narco-state status.
“Unless the country’s leaders show that crime is not profitable, real concerns exist that both security and democracy in the DR could be undermined as they were in Colombia,” wrote Richard Goughnour in a 2009 diplomatic note released by WikiLeaks. Mr. Goughnour cited the country’s casinos as “important vehicles” for this crime.
But the country’s reputation did not scare off the trio, whose Dominican acquisitions would be the start of something bigger. The ultimate goal of their blistering expansion, it seemed, was to create a Caribbean gaming empire and to take the company public.
The gaming world was unfamiliar ground for Mr. DeGroote, but he and Mr. Pajak had known each other for decades.
Law-enforcement officers had known him differently. Four former investigators – two with the Toronto Police Service and two from the RCMP – said in interviews that Mr. Pajak was known to police as someone who is close with mobsters. One of those sources called Mr. Pajak “a mob associate of the first degree.”
In a secretly recorded conversation that has been entered into the court record by the Carbones in response to Mr. DeGroote’s lawsuit, and obtained by The Globe and Mail and the CBC, Mr. Pajak was heard saying, “I arranged to take care of all – of a lot of – the Mob’s money, investments. Because I do everything straight.”
Mr. Pajak, who declined to respond to numerous requests for comment for this story, does not have a criminal record.
There is little on the public record that explains how Mr. Pajak and the billionaire became acquainted. In an examination-for-discovery proceeding, Mr. Pajak testified that he and Mr. DeGroote “go back a long way from the disposal business.”
One of the former investigators identified Mr. Pajak as an official with the Super Group, a onetime Toronto-based company whose waste-management wing, Super Disposal, was the subject of a sweeping organized-crime investigation in the early 1980s.
Super Disposal was described by prosecutors in 1982 as “one mass of criminal activity.” There is nothing on the public record to indicate that Mr. Pajak was implicated in that probe.
But Mr. Pajak was only one-third of Dream.
Very aggressive businessmen
“Because one thing – one thing you said right is they fight to the end. I am ready to fight to the end.”— Antonio Carbone
Part 3
Antonio Carbone speaks with a confidence that belies his background as a house painter. Often decked out in a trim suit set off by a hockey-puck-sized Louis Vuitton belt buckle, he paces while he speaks, draws out syllables for effect, and inserts dramatic pauses – often while he’s taking a long drag on the cigarette that seems permanently affixed between his fingers.
Francesco is less loquacious than his older brother. When he does speak, his tone is more measured.
Despite their differences in age and manner, the brothers tend to act in unison, sometimes finishing each other’s anecdotes.
They grew up in Woodbridge, a suburb north of Toronto, and have moved in lockstep throughout their working lives, moving from one industry to another. They started out with a house-painting business and then shifted to tobacco distribution. They sold their own brand of cigars and flavoured cigarillos under the name Don Carbone. They had only recently moved into slot-machine manufacturing when, with the backing of Mr. DeGroote, they became casino executives in 2011.
The brothers credit their smooth transition into the gaming business to two things: their work ethic and the example of Howard Hughes, whom Antonio idolizes and credits with cleaning up and corporatizing Las Vegas. “Our vision here was to create Las Vegas in the Caribbean,” Antonio Carbone said. “Brand-new facilities, proper uniforms, English-speaking dealers, English-speaking bartenders, the proper Las Vegas look and feel.”
“We bought 12 casinos in 13 months and refurbished them. I don’t think it’s ever been done in history,” he said. “Dream dominated the country overnight.”
But there is another factor besides ambition and vision that launched the Carbones into the casino business. Although neither man will admit it, they had recently run an online bookmaking service. The Carbones’ website, known as DCSC.com or the Don Carbone Sports Book and Casino, was once part of the Platinum Sportsbook group, a network of betting websites that was first linked to organized crime in a 2004 shooting and was eventually dismantled by police in 2013.