Wall Street Journal: 225 Rector Lawsuit
- Posted on:
Wall Street Journal: Marc Held, Partner, Held & Hines, LLP quoted Re: 225 Rector Lawsuit
Cuomo Charges Developer Misused Reserve Fund
By CRAIG KARMIN
Real-estate developer Yair Levy is being sued by Attorney General Andrew Cuomo, who claims that Mr. Levy underfunded and raided a $7.4 million reserve fund for his Battery Park City condominium.
[LEVY1] Newscom
Rector Square building at 225 Rector Place. Attorney General Andrew Cuomo sued the building’s developer.
In a civil suit filed Wednesday in New York State Supreme Court, the attorney general’s office alleges Mr. Levy put up only $1.6 million into the fund, nearly $6 million less than the amount the city requires. He spent all but $70 of the $1.6 million for “personal and unrelated business purposes,” including paying credit card bills and writing checks to himself and relatives, the suit says.
The attorney general seeks restitution, financial penalties and to bar Mr. Levy from working again as a real-estate developer for co-ops or condos in New York.
A spokesman for Mr. Levy said in a statement that the developer was “deeply disappointed” Mr. Cuomo had decided to proceed with the suit.
“We categorically deny the allegations made by the Attorney General, but reserve further comment until we conclude our review of the claims made,” the spokesman said.
An Israeli immigrant, Mr. Levy initially worked in New York’s garment industry where he created a line of women’s sportswear before becoming a real-estate developer. He acquired the 303-unit building on Rector Place, known as Rector Square, in 2005 and later converted some units to condos.
The lawsuit is the latest setback for Mr. Levy. Anglo Irish Bank won a court case earlier this year allowing the bank to foreclose on Rector Square after Mr. Levy’s company, YL Real Estate, defaulted on $165 million in mortgage loans. He also faces a $100 million lawsuit from condo owners at Rector Square, who accuse him of fraud and misrepresentation.
Condo owners at Rector Square filed a formal complaint with the attorney general’s office in February 2009, complaining of “appalling living conditions” and “suspicions that monies for the benefit of the unit owners remained unaccounted for,” Marc Held, attorney for a group of owners at the building, said in a statement.
He cited, among other owner complaints, that the roof was unfinished, the boiler leaked and elevators didn’t operate.
New York law requires that any building converting to a condo or co-op must have a rainy-day fund for capital improvements. The dollar amount is based on a percentage of the cost of units offered for sale.
The attorney general’s lawsuit says that “long after the money in the reserve fund was gone,” Mr. Levy acknowledged in an amendment to the building’s offering plan that he had contributed just $1.6 million to the fund—not the $7.4 million the attorney general said he was required to put up. In addition, Mr. Levy acknowledged he had withdrawn virtually all of the $1.6 million, according to Mr. Cuomo’s suit.
The suit claims that Mr. Levy may have put the building in “possible default” on its land lease because he had failed to make payments related to that lease.
The attorney general also alleges that Mr. Levy used money that should have been in the reserve fund for personal or other business use, including paying a Macy’s bill, checks to Staples as well as checks to his son-in-law and to himself.
Write to Craig Karmin at craig.karmin@wsj.com
