The Real Deal New York

Lender says millions in One Madison condo funds missing

March 29, 2010 09:26PM
By David Jones

Lawyers for iStar Financial claim that the lender never received millions of dollars from apartment sales prior to the foreclosure filing at One Madison Park condominium, according to court documents obtained by The Real Deal.

Lawyers for iStar faced off against counsel for the developer in a March 23 hearing before state Supreme Court Judge Eileen Rakower, who heard arguments about the lender’s request for a court-appointed receiver.

“We’ve got allegations that units have been sold, the same unit, to multiple parties, that millions of dollars are missing that were never provided to the bank,” said Katten Muchin Rosenman attorney Matthew Parrott, the lead attorney for iStar, according to a court transcript obtained by The Real Deal.

Lawyers for buyers have alleged that while most of the down payment checks were made out to the escrow agent, some buyers were asked to make checks out to other law firms or provide blank checks that were deposited in other accounts. They also complain that they were consistently given a runaround when requesting deposit refunds or a detailed accounting of escrow accounts.

Burton Dorfman, attorney for developer Ira Shapiro, declined to comment. Attorney Andrew Albstein of Goldberg Weprin said he never got such a demand to account for escrow funds and said that his firm honored any requests to refund deposits when he got permission from the buyer and the condo sponsor.

“Whatever I’ve been directed to do by both parties I’ve done,” he said.

The Real Deal first reported that developers Ira Shapiro and Marc Jacobs allegedly sold apartments to multiple parties as part of an effort to raise funds for the luxury tower. IStar later filed suit to foreclose on the property, alleging the developer not only defaulted on $199 million in mortgage loans, but sold apartments at One Madison without the lender’s consent.

Meister Seelig partner Stephen Meister, an attorney also representing Shapiro, said he was not aware of any allegations of missing funds.

“So many of them are completely baseless and untrue that it’s really not a good idea to rely on these unsupported allegations,” Meister told The Real Deal.

As previously reported, Attorney General Andrew Cuomo forced the developer to offer rescission of contracts at the 69-unit building at 23 East 22nd Street. But Meister says there are still many buyers who want to buy at the property.

In a March 12 filing, the developer released a new amendment to the One Madison offering plan that gave buyers 15 days to opt out of their contracts and get their deposits back. Court records show that 13 of the 69 apartments were sold, but it remains unclear how many people were under contract to close. 

“We want to get this thing back on track,” said Meister. ”There’s enormous pent-up demand.”

Parrott told the judge that he asked the AG’s office to appear at a scheduled April 13 court hearing to determine whether a receiver will be appointed to oversee the property.

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