The Real Deal New York

Levy, Deutsch hit with new $20M suit at Rector Square

December 23, 2010 03:23PM
By David Jones

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Rector Place and Yair Levy

Embattled developer Yair Levy and his son-in-law Daniel Deutsch are facing a $20 million lawsuit from unit owners at the Rector Square condominium, alleging they failed to complete construction and pay common charges as well as illegally converted funds at the property, all before the building was foreclosed on by Anglo Irish Bank.

The suit, filed Dec. 13 in New York State Supreme Court, claims that residents of the 304-unit building, at 225 Rector Place, have been unable to refinance, sell or get approval for any financial transactions at the building due to Levy defaulting on nearly $165 million in loans at the building, which led to the 2009 foreclosure.

The suit follows a $100 million fraud suit filed by the same unit owners in November 2009 in state Supreme Court against Levy and other officials connected with the conversion, including super broker Michael Shvo and Cooper Square Realty.

Shvo was not immediately available for
comment and Cooper Square declined to comment.

“As the case has progressed and more evidence has come forward, it appears that the number of parties and the amount of monies converted were in greater numbers than expected,” said attorney Marc Held, who represents the unit owners, in an e-mailed statement. “A building worth potentially hundreds of millions of dollars was left with just $70 [in the reserve account] because certain parties used the building’s accounts as their owner personal piggy bank.”

Shvo and Cooper Square previously denied the allegations, according to court records.

Last week’s lawsuit is the latest setback for Levy, who is facing a suit from Attorney General Andrew Cuomo for allegedly spending millions of dollars from the Rector Square reserve fund. Cuomo filed suit earlier this year to ban Levy from developing condos amid allegations that Levy wrote checks from the reserve fund out to Deutsch and spent money on personal cell phone and charge card bills.

Sources familiar with the case recently said that Levy took a credit against the reserve fund account, and was forced to spend some of those funds because Anglo Irish cut off his construction funds in the fall of 2008, leading construction workers to walk off the job.

Levy and a spokesperson for the AG’s office were not immediately available for comment. Deutsch said he was unfamiliar with the suit, so could not comment.

Anglo Irish was scheduled to sell the building earlier this month after buying back the debt on the foreclosed condo in a November auction, but the sale of the property is being delayed at least until January. Sources say the lender is expected to sell the property to Related Cos., which is managing it under a receiver.

Anglo Irish officials was not immediately available for comment and lawyers at Herrick Feinstein, which represents the lender in the foreclosure case, declined to comment.

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