The Real Deal New York

Levy files appeal in Rector Square case

Developer seeks to overturn ruling that bans him from selling real estate in New York

August 12, 2011 02:03PM
By David Jones

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From left: Developr Yair Levy, Attorney General Eric Schneiderman and 225 Rector Place

Developer Yair Levy has filed to overturn the $7.4 million judgment and a banishment from selling real estate by Attorney General Eric Schneiderman, after a state Supreme Court judge ruled that he took millions of dollars from the Rector Square condominium reserve fund.

Supreme Court Judge Joan Lobis, in a June 22 ruling, found that Levy defrauded the Battery Park City condominium by failing to deposit millions of dollars into building’s reserve fund and then spending some of those funds on personal expenses, including charge cards and mobile phone accounts.  

The 304-unit condominium conversion was foreclosed on by Anglo Irish Bank and the unsold shares were sold to the building’s original owner Related Cos, in one of the city’s most closely watched cases.

Rex Whitehorn, attorney for Levy, claims that Supreme Court Judge Joan Lobis ignored evidence submitted by the developer that reserve fund money was used for legitimate purposes and any personal expenses were drawn from separate accounts.

“What Judge Lobis has rendered in her decision is factually incorrect and factually impossible,” Whitehorn told The Real Deal. “It’s almost like the judge made a sensationalistic decision.”

Levy was ordered not only to pay the $7.4 million judgment, but also $360,000 to the state and another $4,000 in discretionary allowances. He was banned from selling real estate in New York state.

Sources say that the AG’s office was planning to aggressively pursue the judgment against Levy, who has property in other states and is believed to own property in Israel as well.

Levy was named in a $100 million lawsuit in November 2009 by unit owners at Rector Square, alleging fraud, negligence and misrepresentation. Levy denied the allegations, as did co-defendants Michael Shvo and Cooper Square Realty. 

Levy is facing a separate lawsuit filed in 2010 by Capital One for a $2.3 million judgment against him, alleging he defaulted on a $2.25 million loan he took out in 2009. Lawyers for Levy have contested the suit alleging he was not properly served.
As The Real Deal previously reported, the conversion of the 225 Rector Place building began to unravel in December 2008 after Anglo Irish Bank shut off funding for the project and construction workers walked off the job. At the same time, Levy continued to close apartment sales with about 46 buyers and sold other units to an Italian university and an extended-stay hotel chain.

Levy would also lose another condo conversion at 101 West 87th Street to foreclosure when Garrison Residential Funding filed to foreclose and Levy threw the project into bankruptcy on the eve of the auction. The building loan was later acquired by a group including Fisher Brothers, BlackRock and a California pension fund.
Marc Held, attorney for the Rector Square unit owners, declined to comment. A spokesperson for the AG declined to comment.

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