Infamous Podolsky brothers being investigated for tax fraud: report

Hoteliers paid by city to house homeless may have hidden money to avoid taxes, sources tell Wall Street Journal

Aladdin hotel at 230 West 54th Street and Stuart and Jay Podolsky (Credit: West 45th Street Block Association and Getty Images)
Aladdin hotel at 230 West 54th Street and Stuart and Jay Podolsky (Credit: West 45th Street Block Association and Getty Images)

They served five years probation for grand larceny and coercion in the 1980s. But now it looks like the Podolsky brothers may have been committing financial crimes too.

Manhattan federal prosecutors are investigating whether hoteliers paid by the city to house the homeless hid money to evade taxes.

Amsterdam Hospitality Group, the firm led by brothers Stuart and Jay Podolsky, allegedly hid money in attorney escrow accounts, sources familiar with the federal investigation told the Wall Street Journal.

Prosecutors are also looking into whether they overbilled subcontractors for repairs and then put the excess funds into shell accounts, according to the Journal’s reporting.

The brothers’ company has received tens of millions of city dollars to house the homeless over the last five years, in Manhattan hotels like the Aladdin Hotel, the Apollo Hotel and the Ellington Hotel, sources told the Journal.

Records show the City paid the city paid $5.4 million in the fiscal year 2018 alone to house homeless people at the Aladdin, near Times Square.

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The city currently houses around 60,000 people shelters and hotels, spending about $384 million annually.

The exact size of the Podolskys’ empire is hard to pin down because they use a series of shell companies to operate their properties and avoid the scrutiny of city officials and auditors, sources familiar with the brothers’ business practices told the Journal.

A spokesperson for the brothers said they were unaware of any investigation and maintained that they never attempted to keep the family name out of the public record. “As with any large company, a team of accountants, both in house and out, prepare the tax returns for the various companies and individuals,” the representative said.

The brothers and their company have been embroiled in controversy for decades, including allegations from tenants and housing activists that their properties are unsafe.

In 1986, the Podolskys pleaded guilty to charges of grand larceny and coercion, after they were indicted for using illegal means to force tenants out of apartments, including paying men to harass and forcibly evict tenants.

The current probe into the Podolsky’s business appears to be connected to the guilty plea of their former employee, George Dfouni, in a wire fraud and tax evasion case in New Jersey last year, according to the Journal. Prosecutors in that case that Dfouni he stole portions of payments that he negotiated for the Amsterdam Hospitality Group while working there, embezzling nearly $14 million from the company. They also say that between 2007 and 2014 Dfouni didn’t report $28 million in income to the Internal Revenue Service. [WSJ] – Decca Muldowney