It was widely reported last week across both Canadian and international media sources that Frank Stronach, the founder of Magna International and The Stronach Group has sued his daughter, Belinda Stronach, and several others.

The Lawsuit

The suit was filed in Ontario Superior Court earlier his month by Frank Stronach (Frank) and his wife, and seeks more than $520 million in damages.  It names Belinda Stronach (Belinda), her two children, Alon Ossip- the Stronach Group CEO (Ossip), and others as defendants.

Frank Stronach claims the defendants have mismanaged family assets and trust funds, specifically stating that Belinda and Ossip have “undertaken a series of covert and unlawful actions” that are contrary to the best interests of the Stronach family.

Other accusations include breach of contract, fraudulent concealment, and unjust enrichment.

This misconduct allegedly occurred in the period between 2011 and 2016 when Frank appointed Belinda as the chairman and president of The Stronach Group.

Specific claims include, among other things, allegations that:

  • Belinda led an “extravagant lifestyle” costing the company more than $70 million.;
  • “Belinda and Alon have asserted control over The Stronach Group in an oppressive manner, and have taken steps to shut the rest of the Stronach family out of the family’s business.”;
  • “Belinda has appropriated funds from The Stronach Group and has acted in a self-interested manner. She has placed herself repeatedly in situations of potential and actual conflict.”;
  • “Alon failed to fulfill his most basic obligations as CEO of The Stronach Group. Instead, he breached repeatedly his legal, equitable and fiduciary duties.”;
  • “[Belinda and Alon] routinely failed to report to work for days or weeks at a time in the period from late 2013 to November 2016, and failed or refused to return calls, emails and texts on a timely basis, or at all, including from members of The Stronach Group and from others associated with the various businesses carried on by The Stronach Group.”;
  • “Belinda would show up for scheduled meetings hours late, or sometimes not at all. Frank has also become aware that Belinda has hired, and continues to hire, her friends and acquaintances to occupy positions of authority in The Stronach Group that they are unqualified to fulfill.”;
  • In November 2016, Belinda and Ossip “informed Frank for the first time that The Stronach Group was facing significant liquidity issues” which “came as a surprise to Frank and raised red flags about their management of The Stronach Group.”;
  • “Alon belittled and embarrassed Frank, and did so with the blessing and encouragement of Belinda.”;
  • “Belinda and Alon made clear to Frank, [his wife] and employees of The Stronach Group that they intended to exert control over the organization, and to eliminate Frank’s role in the family enterprise that he had created and funded.”;

The Stronachs have requested that Belinda Stronach and Ossip be removed from their positions of power within the business.

None of the allegations have been tested or proven in court, and no statements of defence have yet been filed.

Some Context

Frank moved to Canada from Austria when he was 21. Once in Canada, he started a company out of his garage before growing it into global giant Magna International, a car parts company with more than 330 manufacturing operations in almost 30 countries.

He later expanded his business ventures and created The Stronach Group, which operates various horse-breeding and horse-racing companies, including two racetracks in the U.S. Frank Stronach is now the largest operator of thoroughbred race tracks in North America.

Belinda is president of the Stronach Group and a former Member of Parliament, having served in the House of Commons from 2004 to 2008 (first for the Conservatives, before crossing the floor and joining the Liberals.

Ossip was appointed the CEO of The Stronach Group in 2013, where he was paid $1 million annually plus benefits, a “sizeable” discretionary bonus, and a 5% interest in some assets of the company.

Belinda suspended Ossip as CEO in 2017, but he still maintains positions are trustee, director, and officer of various trusts within the company.

A Statement from Frank Stronach

A statement made by Frank Stronach’s legal team notes that Frank Stronach and his wife “regret having to commence proceedings” against family members, but that this was done “as a last resort, having made considerable efforts over a period of almost two years to resolve the matters at issue on a consensual basis.”

Reaction from Belinda Stronach

Belinda Stronach also released a statement noting that:

“family relationships within a business can be challenging…[m]y children and I love my father. However, his allegation are untrue and we will be responding formally to the statement of claim in the normal course of the court process.”

Reaction from Alon Ossip

Alon Ossip likewise released a statement noting that the claims in the lawsuit are “baseless and not grounded in fact or reality”. He further noted that he has always honours 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.” He further noted that this is a family dispute that should be settled between family members.

Reaction from the Stronach Group

The Stronach Group noted that “while we regret the tension that exists within the Stronach family, it remains business as usual [for the Group]”.

We will continue to follow this lawsuit as it proceeds, and will provide updates as they become available. In the interim, if you have questions about estate litigation, including claims made by family members against other family members, or claims made in complex situations involving inter-generational family businesses, contact Eli Karp at Financial Litigation. We are a boutique Toronto law firm with a unique focus on the financial impacts of legal disputes. We help business owners, entrepreneurs, and professionals manage some of the largest legal landmines threatening their continued success. Respond to a legal crisis with Financial Litigation, and let our unique experience guide you through your financial or other dispute. Schedule your consultation online, or by calling us at 416 769 4107 x1.