The Real Deal New York

Swig dealt blow in $32M Square Mile judgment case

October 22, 2009 05:43PM
By David Jones

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Developer Kent Swig was denied a motion to reargue or stay enforcement of a $32 million judgment by Square Mile Structured Debt yesterday.

New York State Supreme Court Judge Bernard Fried ruled that Swig failed to prove any legal errors that would allow him to reopen or delay the case. The judgment was issued against Swig after he defaulted on a $28 million personal loan from Square Mile that was used to help develop the troubled Sheffield57 condominium near Columbus Circle. Fried denied the motion despite allegations that Swig was denied access to critical documents and that Square Mile misrepresented key facts to Swig.

Fried ruled that the only way to issue a stay would be if the court “overlooked or misapprehended the facts or the law.”

The ruling will likely provide further hardship for Swig and his considerable number of real estate assets, which include Swig Equities, the real estate development firm; Helmsley-Spear, the commercial real estate firm previously owned by Harry Helmsley; and Terra Holdings (where he is co-chairman and co-owner), the parent company of Brown Harris Stevens and Halstead Property.

Officials at Swig Equities were not immediately available for comment.

As The Real Deal previously reported, Swig threatened to file for bankruptcy protection if the judgment was enforced against him, saying he did not have the ability to pay back the $28 million, according to court documents. Swig is facing numerous lawsuits for alleged loan defaults, including a $50 million judgment related to mezzanine loans at his 25 Broad Street condominium conversion, $12 million in loans from Deutsche Bank, a $5 million line of credit at Citibank and a $4.75 million loan at Signature Bank

As The Real Deal also reported, Swig filed suit in September against Property Asset Management Services, a firm that manages executive compensation for Terra Holdings. Terra was one of at least 40 Swig-related entities that received subpoenas from Square Mile to disclose financial information or freeze payments to Swig until the judgment is satisfied.

On Oct. 9, attorney Y. David Scharf disclosed that he had resigned from Swig’s case, but asked Judge Fried to extend enforcement of the judgment by 45 days, while Swig searched for new lawyers. Scharf noted in the court filing that Swig was unable to pay his legal fees because of the post-judgment restraining notices.

“I don’t turn people out on the street,” Scharf told The Real Deal. “We asked the court to give them additional time to respond.”

Scharf asked Fried for a similar delay in the blockbuster lawsuit by Yair Levy and Serge Hoyda that claimed Swig embezzled millions of dollars in construction funds from Sheffield57. The court refused to block the Aug. 6 auction of Sheffield57 to Fortress Investment Group, and discovery is set to begin for a trial to determine whether Swig defrauded his former partners in the condo.

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