AG Settlement – Boymelgreen, Leviev… Where’s the Authenticity, Schneiderman?

 In 2014, THE REAL DEAL reported on the investigation which had been launched by AG Eric Schneiderman into the partners’ Boymelgreen and Leviev’s luxury real estate business. Schneiderman’s focus at the time was 20 Pine Street and 15 Broad Street. The Broad Street location is only steps from 23 Wall Street, The JPMorgan building, a location which we view as far more important in the architectural structure that supports if not fosters corruption in New York and elsewhere.

In 2014 Schneiderman sought to enjoin Boymelgreen from doing business in New York until it could be determined whether Boymelgreen’s son, Sam, was acting as a frontman for his father’s business.

Today, it was reported that Boymelgreen will be “banned” from selling condos in New York. The humor in the settlement can be found in son – Sam, mentioned in THE REAL DEAL article in 2014. Is he not still to be a “front” and center concern in the family business?

We don’t hear much about Sam Boymelgreen but we do know that he is not precluded from doing business in New York. Why was he not included in the settlement? Or, did we miss something?

Certainly AG Schneiderman had to have considered in 2016 what was unsettling in 2014, that when father and son are engaged in the same business, a ban is not really a ban it is an invitation to switch heads of state. Or… rather… heads of family businesses.

We have posted the New York Times article regarding the audacious 2-year ban settlement for papa Boymelgreen. Below that, we have posted the article from THE REAL DEAL in 2014.

We repeat and reiterate, little has changed. Except perhaps, that while we have followed the news and learned that one must be wary of Boymelgreen, Leviev and others; Schneiderman has missed the current events page in his syllabus. He seems to think that a 2-year ban has meaning. It does not.

And then there’s the Broad Street/Wall Street, Arcady Gaydamak  Sam Pa, Platinum Partners, Leviev, Panama Papers connections…

 

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FROM THE NEW YORK TIMES:

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.

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.”

The investigation involved his sale of condominiums in Brooklyn and Manhattan, unfinished work at six of those projects, and his refusal to fix construction defects.

Under the terms of the agreement, which was reached earlier this month, Mr. Boymelgreen agreed to resolve building violations and construction problems at six properties he developed, including a 409-unit condominium at 20 Pine Street in Lower Manhattan; Beacon Tower, a 79-unit condo at 85 Adams Street in Dumbo, Brooklyn; and Newswalk, a 137-unit condo in a former Daily News printing plant in Prospect Heights, Brooklyn.

Mr. Boymelgreen is barred in New York from participating in the offer or sale of securities, including condos, for two years. If he fails to adhere to the settlement, he will be permanently barred from selling apartments in New York. Mr. Boymelgreen’s partners Itzhak Katan and Domenick Tonacchio are also covered by the settlement.

Mr. Boymelgreen’s lawyers did not returns calls for comment.

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.”

Born in Israel, Mr. Boymelgreen, 65, immigrated to the United States in 1969, where he initially worked in the field of asbestos abatement. He gradually took on real estate projects before forming a partnership with the Israeli businessman and diamond merchant Lev Leviev in the early 2000s.

With Mr. Leviev’s financial backing, Mr. Boymelgreen expanded rapidly, converting industrial buildings into residential complexes and developing apartments. He opened a New York bank, LibertyPointe, and pushed into real estate markets in Israel, Las Vegas and Miami.

His partnership with Mr. Leviev ended in acrimony in 2007. The real estate market collapsed shortly after. Regulators closed his bank in 2010, and he was evicted from his Brooklyn office. Lawsuits piled up at his doorstep.

In January, the attorney general settled with Mr. Leviev and his company, Africa Israel Investments, over unfinished construction and shoddy workmanship at 15 Broad Street and 20 Pine Street, both in Lower Manhattan, and at 85 Adams Street in Brooklyn. According to the attorney general’s office, after selling out the units at 15 Broad and collecting at least $360 million in 2008, the partners abandoned efforts to finish the work and drained the escrow funds, while assuring buyers that the money had been set aside.

Mr. Boymelgreen has settled with the condo boards for 15 Broad and 20 Pine for undisclosed sums.

To read the article in its entirety click here.

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THE REAL DEAL 2014:

Court slaps temporary ban on Boymelgreen, Africa Israel

UPDATED, 5:22 p.m., Feb. 28: New York Attorney General Eric Schneiderman said that developers Jeshayahu “Shaya” Boymelgreen and Africa Israel Investments Ltd., led by billionaire Lev Leviev,have been temporarily banned by a Manhattan Supreme Court order from transacting any coop and condo sales. The ban was put in place pending a fraud investigation into dealings at the Downtown Condominium at 15 Broad Street.

The AG won a court order late Thursday amid a probe into unfinished renovations at the condo, which has 382 residential units, and failure to obtain a permanent certificate of occupancy.

Judge Richard Braun ordered the developers to deposit $470,000 — funds that the AG says should have been held in escrow — into a court supervised account. The judge also ordered the developers to hand over financial and construction related documents by March 24, when a court hearing is scheduled. They are also ordered to hand over temporary control of the board to unit owners.

“This fraud on homebuyers, conducted literally on Wall Street, is emblematic of the very worst conduct by property developers,” Schneiderman said in a statement. “Homebuyers at the Downtown Condomium were deprived of the most fundamental aspects of homeownership — a completed home and control of their property.”

“AFI is unable to comment as they literally only received the filing a few hours ago and their attorneys are still reviewing,” said a spokesperson for AFI. Lawyers for 15 Broad were not immediately available for comment.

The AG launched an investigation into the luxury condo building in January 2013, amid years of litigation over construction defects between an independent committee of the condo board and the sponsor entity, which was a joint venture between Boymelgreen and Africa Israel. Although Boymelgreen exercised day-to-day control of the property, after they split in 2007, according to the court docs

The AG alleges that the developers claimed to have $9.4 million in an escrow fund and were using that money to obtain a permanent certificate of occupancy from the Department of Buildings. The investigation shows that the millions were drained from the account within months of establishing the fund and that the developers never attempted to get a permanent certificate, which would involve repairing defects at the building with those funds.

Account statements show that the developers authorized eight withdrawals from the escrow account, according to court documents, and that as of April 2007, the account contained only $57,747, and as of January 2014, the balance is only $58,000.

The suit also claims that the developers disclosed that the escrow funds would be held in a Citibank account, but they were instead held at Liberty Point Bank, an entity that went out of business, was chaired by Boymelgreen and was shut down by the New York State Banking Department in 2010.

As The Real Deal previously reported, those assets were sold to Wayne, N.J.-based Valley National Bank.

Assistant Attorney General Elissa Rossi, in a sworn affidavit, says that Boymelgreen has refused to comply with a 2013 subpoena from the AG. An attorney for Africa Israel responded to document requests by providing documents that were ‘general and useless,’ in terms of the demands of the AG, Rossi said.

Lawyers for the unit owners said they were pleased that the AG is finally pressing forward with the case.

“After litigating against the sponsor for the past three years and jumping over every hurdle they’ve tried to put in our way, it appears through the AG’s proceeding, that there may be an expedited view of the light at the end of the tunnel,” said attorney Steven Sladkus, representing the unit owners. “The sponsor’s failure to obtain a permanent certificate of occupancy and prolonged control of the board is now being addressed by the state.”

The Real Deal last month reported that Boymelgreen’s son Sam has been developing new projects in New York, amid concerns that he is acting as a front for his father’s business. The son is not named as a target of this investigation at Downtown. A spokesperson for the younger Boymelgreen said he has no connection to 15 Broad.

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