The Real Deal New York

Rushmore’s escrow agent stops payment on $15M sent to buyers

More than two dozen buyers had recently received payouts, after three years of litigation

December 21, 2012 04:00PM
By David Jones

From left: Extell’s Gary Barnett, the Rushmore and Andrew Chung of Carlyle Realty

Lawyers for 40 buyers at the Rushmore condominium were awarded an injunction against the developers, after Stroock & Stroock & Lavan stopped payment on more than $15 million in escrow refunds. The buyers  just recently received the payouts, on the heels of three years of litigation with the Extell Development and Carlyle Realty Partners.  

But Stroock, the escrow agent and author of the offering plan at the Rushmore, sent an email to those buyers on Thursday, notifying them that the payments had been stopped and said it would seek the return of refunds already issued to buyers. “It has been called to our attention that, in light of the attached Feb. 22, 2012 stipulation among the parties, we have released certain escrow payments prior to the expiration of the agreed upon time for their release,” wrote Stroock attorney Bruce Schneider, in an email obtained by The Real Deal. “We have stopped payment on those checks still not paid.”

The Rushmore is situated at 80 Riverside Boulevard on the Upper West Side.

A five-member Appellate Court panel earlier this month rejected arguments by Extell and Carlyle that former Attorney General made an error when he ordered them to refund $16 million in escrow payments in April 2010. (At least one of the buyers have since settled with Extell, bringing the amount owed down to about $15 million.)

The email continues to warn the buyers’ attorneys that they are bound by the stipulation agreement and that they may be required to “restore those funds” that have already been released to them.

According to court documents obtained by The Real Deal, the checks were issued by Stroock on Dec. 12, with letters dated Dec. 14 written to the individual purchasers. Court documents show that 29 of the checks were sent by Federal Express to the law firm of Cohen & Coleman, which represents 33 of the buyers and received Dec. 17.

Lawyers for the buyers alleged in court documents that they contacted Schneider because two checks were missing. He is said to have advised them that two other checks were sent directly to purchasers and confirmed that he read the order and sent out the checks.

“We were stunned to receive Mr. Schneider’s email,” attorney John Coleman wrote in the court filing. “Based upon the receipt of the checks and our conversation with Mr. Schneider, we had every reason to believe that Stroock had been specifically authorized by Sponsor to release the down payments.”

Coleman also argued that his firm believed that the checks were issued before the deadline, because Justice Anil Singh had ordered the developers to post an additional $5 million to cover interest payments, after the developers fought repeated orders to refund the escrow funds when they lost previous court decisions.

New York State Attorney General Eric Schneiderman declined comment, through a spokesperson. Ed Normand, a partner at Boies, Schiller & Flexner, which is representing Extell and Carlyle, had no comment.

 

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