Days after Canadian financial regulators seized control of a private equity firm over allegations it had misled investors to plow almost $100 million into a high-risk venture, a group of Chicago area businessmen have amended their pending $36 million lawsuit against Paramount Equity Financial Corporation and Canadian businessman Enzo Mizzi, now also accusing Mizzi’s group of fraud for not telling them the source of tens of millions of dollars the group promised to help fund a joint venture to develop thousands of senior living residences in Illinois and Wisconsin.

On June 16, plaintiffs SSU LLC, which does business as Sunny Side Up, filed an amended complaint in Cook County Circuit Court, again naming as defendants Paramount, Mizzi, Green Bear Real Estate Capital LLC and Brad Burdon.

Sunny Side Up is a corporation including members Jeffrey Rothbart, of Lake County, and Cook County residents Scott Radis and Doniel Cohen.

Green Bear includes representatives Jonathan Greenspahn, of Cook County, and Ronald Gaither, of Florida, as well as Paramount founder Marc Ruttenberg, of Ontario.

The amended complaint builds on the lawsuit initially filed by Sunny Side Up in Cook County court in March against Mizzi, Paramount and their co-defendants.

According to the lawsuit, Greenspahn first approached the Sunny Side Up plaintiffs in the spring of 2016, proposing to partner with them to buy several senior living facilities in Wisconsin and Illinois.  According to the lawsuit, Greenspahn and his partners, including Mizzi, proposed investing more than $125 million in the venture. Under the proposal, the partnership would hold the facilities for about five years, and then sell them into a real estate trust or to other institutional investors.

The lawsuit said Sunny Side Up believed the venture would be “tremendously profitable.”

However, after SSU invested months of time and money in identifying and lining up sites for purchase, the complaint said Mizzi and Greenspahn began offering a list of excuses for delaying closing, ultimately cutting off communication with the SSU group in January 2017, shortly after informing the SSU members of a cease and desist order issued by the Ontario Securities Commission.

Two months later, Sunny Side Up filed suit, demanding more than $36 million in damages.

At the end of May, the Ontario financial regulators announced the province had appointed a receiver to take control of operations at Paramount, citing the equity firms continued efforts to raise about $39 million, even after provincial officials had asked the firm in June 2016 to cease raising funds from investors.

Regulators indicated they believed the Paramount group had fraudulently raised more than $100 million from individual investors, “lying to investors about where their money was being invested, the risks of the investments, and Paramount secretly taking a 50 percent ownership interest in investments and other fees and commissions without telling investors.”

“Paramount investors were told their investment would be invested in second residential mortgages when in fact 70 percent of the money raised was used to invest in land and multiresidential development projects, 70 percent of which were direct investments controlled by Mizzi,” the complaint said.

Sunny Side Up said at no time did Paramount, Greenspahn or Mizzi, or any of their representatives, make “SSU aware of the enormity of the fraud committed by Paramount.”

“Since the Plaintiff’s first complaint was filed, the OSC has shut down Paramount and appointed an interim receiver and SSU was left holding the bag for what should have been a tremendously profitable venture had it not been built on Defendant’s fraudulently obtained monies and misrepresentations,” SSU wrote in its amended complaint.

SSU continues to ask the court to award them at least $36.3 million in compensatory damages.

Sunny Side Up is represented in the action by attorneys Alexander N. Loftus and Andrew Stoltmann, of Stoltmann Law Offices, of Chicago.

According to Cook County court records, the defendants are represented by the firm of Freeborn & Peters, of Chicago, who did not reply to a request for comment. 

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Cook County Circuit Court Freeborn & Peters LLP Stoltmann Law Offices

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