By Bill Finley
A bitter and divisive power struggle that has been simmering behind the scenes for years within the Stronach family is about to boil over very publicly in a court of law.
Frank Stronach, the 86-year-old Canadian business titan who is renowned within the Thoroughbred industry as a breeder and owner of racehorses and for building North America's largest conglomerate of racetracks, filed a bombshell lawsuit in a Toronto court Oct. 1 alleging that the daughter he appointed to run his empire, Belinda Stronach, has mismanaged the family's chief assets and trust funds while forcing her father out of control of the fortune he created.
Belinda Stronach, 52, is the chairman and president of The Stronach Group (TSG), which operates, among numerous other holdings, Santa Anita Park, Golden Gate Fields, Gulfstream Park, Laurel Park, Pimlico Race Course and Portland Meadows. According to the lawsuit, she has also been a trustee of three family trusts and a beneficiary of one of them.
Alon Ossip, the chief executive of TSG, is named as a co-defendant. His role, according to the lawsuit, involves allegedly conspiring with Belinda Stronach in “a series of covert and unlawful actions…that have been contrary to the best interests of, and to the overwhelming detriment of, other members of the Stronach family.”
The 73-page lawsuit, which TDN obtained from the Ontario Superior Court of Justice, lists 39 demands for relief that Frank Stronach is seeking via court trial, including the removal of Belinda Stronach and Ossip from all corporate officer and trustee positions related to the Stronach empire.
According to the suit, Frank Stronach is also seeking three separate forms of financial redress:
• $250 million (CDN) in compensation to the plaintiffs, family trusts, and TSG entities for “all losses, damages or harm suffered as a result of the Defendants' unlawful or oppressive conduct.”
• $250 million (CDN) in damages “against Belinda and Alon…for breach of fiduciary duty, breach of trust, and unlawful means of conspiracy.”
• $20 million (CDN) in “punitive, aggravated, and/or exemplary damages” against Belinda Stronach and Ossip.
“At the heart of the proceeding lies a series of unlawful actions undertaken by Belinda, together with Alon and others associated with them, to appropriate Stronach family assets for their own personal benefit,” the suit contends. “Belinda and Alon appropriated control over the business and assets of TSG after having concealed their actions from Frank [and other family members] during the period from at least 2011 to November 2016 when Belinda and Alon took the position, for the first time, that Frank was no longer in control of, and had no role in running, the family empire.”
The lawsuit alleges “a complete break-down” of relationships within the Stronach family as a result of the ongoing strife. Frank's wife, Elfriede, is named as a co-plaintiff.
Two of Frank Stronach's grandchildren, Nicole and Frank Walker, ages 25 and 27, respectively, are also named as co-defendants. They are Belinda Stronach's children, and both served as trustees of family assets from 2013-17, according to the suit.
Two Wednesday phone messages left with Belinda Stronach's assistants at TSG's Ontario offices did not yield comments in time for deadline for this story.
Ossip's attorney, Mark Gelowitz, confirmed via email that his client has authorized a spokesperson, Paul Deegan, to issue the following statement:
“These allegations are baseless and are not grounded in fact or reality. Alon has always honored his obligations and acted in good faith to preserve and grow the Stronach family's assets and to protect the interests of all members of the family. Alon created huge wealth for the family, and he has always operated in a prudent and commercially sensible manner. Frank Stronach was a great auto parts entrepreneur, but his recent excessive spending and numerous failed ventures put his family's wealth at risk. This is a dispute between Stronach family members that should be resolved between family members.”
The rags-to-riches rise of the Austrian-born Frank Stronach is well known within the racing industry, and he has been honored with numerous awards during his ascendancy from a small-scale Ontario horse owner and breeder to a global Thoroughbred power player. Over the course of six decades, he concurrently enjoyed commercial success as an auto-parts magnate, and several of his early racing holdings were intertwined with that firm, Magna International.
As Frank Stronach's scope and scale of investment within Thoroughbred racing grew, he formed Magna Entertainment Corporation (MEC) in 1999 to keep his racing interests separate from the automotive business.
Belinda Stronach came on board with MEC in 2001 as its chief executive, although she briefly stepped away shortly thereafter for a run in Canadian politics.
Over the decades, as his wealth grew, Frank Stronach formed various trusts to share the fortune with family members.
According to the suit, even though other family members were eventually named as trustees, it was understood that the patriarch would always retain “Super Trustee” status.
“All members of the family, including Belinda, understood and agreed that Frank would maintain control of the family business as the creator of the family's wealth,” the suit contends.
By the first decade of the 21st century, MEC began morphing into TSG, which is described in the suit as “a complex network” of 253 Stronach family-owned corporations, trusts, and other entities established in various jurisdictions around the world.
By 2013, Frank Stronach assumed the title of TSG's “founder and honorary chairman,” while Belinda Stronach and Ossip took on greater day-to-day executive powers within the company. Ossip, according to the suit, was paid a $1 million annual salary and was given roughly 5% interest in certain TSG assets.
“From virtually the moment this arrangement was entered into, Alon failed to fulfill his most basic obligations as CEO of TSG,” the suit alleges. “Instead, he breached repeatedly his legal equitable and fiduciary duties.”
In September 2013 Frank Stronach stepped away from his racing ventures and resigned leadership positions with two family trusts in order to fulfill a lifelong goal of leading a party that would get elected to the Austrian Parliament. His party got voted in, but by January 2014 he resigned from its active leadership and returned to Ontario to re-immerse himself in TSG, assuming that everything was “business as usual.”
But according to Frank Stronach's version of events detailed in the lawsuit, it wasn't.
“Frank later learned that during this period Belinda and Alon seriously neglected the business of TSG and [had] abused their positions of authority,” the suit states. “They did so in order to conceal significant cash flow issues, and to favour their own personal interests at the direct expense of rights and interests of other members of the Stronach family.”
In fact, the suit contends, it wasn't until November 2016 that, “Belinda and Alon informed Frank for the first time that TSG was facing significant liquidity issues. This came as a surprise to Frank and raised red flags about their management of TSG.”
The suit then details a litany of alleged power plays initiated by Belinda Stronach and Ossip, including their refusal to let Frank Stronach act on routine business transactions.
“Belinda and Alon were confrontational, disrespectful and insubordinate,” the suit alleges. “They demanded that Frank take steps to rein in or terminate all expenditures and investments being made by him on behalf of TSG…. Belinda and Alon also took the position, for the first time, that Frank had no authority to act in the name of any of the businesses owned or operated by TSG…. They asserted that Frank had no signing authority or ability to access corporate funds.”
Ossip, according to the suit, also threatened to fire any TSG employees who carried out orders from Frank Stronach.
“Alon belittled and embarrassed Frank, and did so with the blessing and encouragement of Belinda,” the suit contends.
Eventually, Frank Stronach insisted to his daughter that Ossip be terminated. The suit alleges that Belinda Stronach only paid lip service to her father's request, telling him that Ossip would be “suspended” and play no further role in TSG business, when in reality, the two allegedly “collaborated covertly” to keep Frank Stronach from figuring out that Ossip was still actively involved.
The suit alleges that Frank Stronach then began making repeated requests to see documentation about TSG's finances, but “for well over a year, Belinda stonewalled and deflected Frank and his advisors.”
On Jan. 9, 2017, Frank Stronach reappointed himself to several family trusts, taking over control from his two grandchildren.
The next day Belinda Stronach fired back, saying it was not legal for him to do so.
And on Jan. 15, 2017, “Belinda once again wrote to Frank, and stated that she would not allow him to 'take control' of the family business,” the suit contends.
Over course of the next year, according to the suit, Frank Stronach tried to reconcile the family fiasco as best as he could without bringing the entire affair before a court of law.
But the suit contends that strategy hasn't worked, and that Belinda Stronach to this day continues to “dismantle and sell off other [non-racing] assets that form part of the Stronach family empire.”
Among Belinda Stronach's alleged malfeasances, the suit contends, are demands for distributions from the family trusts, the hiring of unqualified friends to fill TSG positions “at exorbitant salaries,” and the submission of bogus TSG reimbursement requests for “hundreds of thousands of dollars in personal expenses…associated with parties, vacations for Belinda and her children, limousine rides and expensive meals, none of which related to legitimate business expenses.”
The defendants have 20 days from the date the suit was initiated to file a response with the court.