The New York Times today had a hand-delivered scoop, New York Attorney General Settles Inquiry Into Once-Successful Developer:
The New York attorney general said on Monday that his office had settled a long-running investigation into the business practices of Shaya Boymelgreen, a once-high-flying developer whose collapse during the recession left a trail of irate condominium owners, partners and lenders.Later today, Schneiderman issued a press release, A.G. Schneiderman Announces Settlement Barring Major NYC Developer From Participating In Real Estate Offerings:
Attorney General Eric T. Schneiderman said the agreement would put “an end to Mr. Boymelgreen’s perpetual fraud and abuse in New York City real estate securities.”
NEW YORK—Attorney General Eric T. Schneiderman today announced a settlement with real estate developers Jeshayahu Boymelgreen, Itzhak Katan, and Domenick Tonacchio and several of their entities. The settlement ends the Attorney General’s investigation of potential Martin Act violations at six condominiums in Manhattan and Brooklyn that were developed by Boymelgreen either in partnership with others or on his own. The agreement also bars Boymelgreen from participating in the offer or sale of securities, including condominiums, in or from New York State for a period of two years. The Attorney General’s investigation found numerous violations at the properties, including failure to complete construction projects after selling residential units and failure to remedy alleged construction defects. Should Boymelgreen fail to fulfill his obligations under the settlement, he will be automatically and permanently barred from participating in the offer and sale of securities in or from New York State.The various projects involved partnerships, but Boymelgreen and entities he controlled were the sole developers involved in the Newswalk Condominium, according to the AG.
“Today’s settlement should serve as a lesson to other developers who choose to ignore and break the rules,” said Attorney General Schneiderman. “We will not hesitate to take tough action against unscrupulous individuals who violate the rights of purchasers and tenants. I am pleased that this settlement will return restitution to those who have been harmed by these illegal practices.”
The six properties included in the settlement are:
The Downtown Condominium at 15 Broad Street in Manhattan;
The 20 Pine Condominium in Manhattan;
Beacon Tower at 85 Adams Street in Brooklyn;
The Novo Condominium at 353 Fourth Avenue in Brooklyn;
The Crest Condominium at 302 Second Street in Brooklyn; and
The Newswalk Condominium at 535 Dean Street in Brooklyn.
The press release stated:
The Martin Act, New York’s blue sky law, requires offerors of real estate securities, such as cooperatives and condominiums, to disclose the terms of the offering to purchasers in an offering plan. The law also gives the Attorney General broad enforcement powers to compel developers to fulfill their legal obligations and promises made in the offering plan. For example, developers are required to complete construction of their projects by procuring the permanent certificate of occupancy (PCO) promised in the offering plan, and they must set aside money necessary to complete the project. Developers are also required to deliver properties that conform to the New York City Building Code which establishes standards for fire-safe construction and prevention of water leaks.Regarding Newswalk, the press release steated:
Newswalk is a 137-unit condominium in Prospect Heights, Brooklyn. Boymelgreen began development of the property in 2000 and all residential units have been sold. Respondent Boymelgreen promised to deliver a building compliant with the New York City Building Code. The Attorney General has collected evidence indicating that the building is lacking fireproofing and suffers from other construction defects. Newswalk unit owners sued respondent Boymelgreen in a private action nine years ago and Boymelgreen has failed to resolve that litigation. Today’s settlement requires Boymelgreen to deposit funds with the Attorney General and, if the Newswalk case is not resolved by a date certain, those funds will be released to the Newswalk homeowners.
Also under the settlement the respondents will pay the Attorney General $100,000 to cover the cost of its investigation.
The investigation dates to 2013, but condo buyers in Mr. Boymelgreen’s buildings began filing lawsuits as early as 2007. Residents complained of unfinished work, widespread leaks and a lack of fireproofing. At Newswalk, condo owners had to spend an additional $8 million “in order to make the building habitable,” said David L. Berkey, a lawyer for the condo board, which sued Mr. Boymelgreen and his partners.Mr. Berkey said he was hopeful that the attorney general’s settlement would quickly lead to a settlement with his clients. Mr. Boymelgreen’s offering plan for Newswalk in 2002 indicated that the apartments would generate $127 million. “There should be enough proceeds to enable a settlement,” Mr. Berkey said, “unless it’s been lost on other bad deals.”