UPDATED, 5:22 p.m., Feb. 28: New York Attorney General Eric Schneiderman said that developers Jeshayahu “Shaya” Boymelgreen and Africa Israel Investments Ltd., led by billionaire Lev Leviev,have been temporarily banned by a Manhattan Supreme Court order from transacting any coop and condo sales. The ban was put in place pending a fraud investigation into dealings at the Downtown Condominium at 15 Broad Street.
The AG won a court order late Thursday amid a probe into unfinished renovations at the condo, which has 382 residential units, and failure to obtain a permanent certificate of occupancy.
Judge Richard Braun ordered the developers to deposit $470,000 — funds that the AG says should have been held in escrow — into a court supervised account. The judge also ordered the developers to hand over financial and construction related documents by March 24, when a court hearing is scheduled. They are also ordered to hand over temporary control of the board to unit owners.
“This fraud on homebuyers, conducted literally on Wall Street, is emblematic of the very worst conduct by property developers,” Schneiderman said in a statement. “Homebuyers at the Downtown Condomium were deprived of the most fundamental aspects of homeownership — a completed home and control of their property.”
“AFI is unable to comment as they literally only received the filing a few hours ago and their attorneys are still reviewing,” said a spokesperson for AFI. Lawyers for 15 Broad were not immediately available for comment.
The AG launched an investigation into the luxury condo building in January 2013, amid years of litigation over construction defects between an independent committee of the condo board and the sponsor entity, which was a joint venture between Boymelgreen and Africa Israel. Although Boymelgreen exercised day-to-day control of the property, after they split in 2007, according to the court docs
The AG alleges that the developers claimed to have $9.4 million in an escrow fund and were using that money to obtain a permanent certificate of occupancy from the Department of Buildings. The investigation shows that the millions were drained from the account within months of establishing the fund and that the developers never attempted to get a permanent certificate, which would involve repairing defects at the building with those funds.
Account statements show that the developers authorized eight withdrawals from the escrow account, according to court documents, and that as of April 2007, the account contained only $57,747, and as of January 2014, the balance is only $58,000.
The suit also claims that the developers disclosed that the escrow funds would be held in a Citibank account, but they were instead held at Liberty Point Bank, an entity that went out of business, was chaired by Boymelgreen and was shut down by the New York State Banking Department in 2010.
As The Real Deal previously reported, those assets were sold to Wayne, N.J.-based Valley National Bank.
Assistant Attorney General Elissa Rossi, in a sworn affidavit, says that Boymelgreen has refused to comply with a 2013 subpoena from the AG. An attorney for Africa Israel responded to document requests by providing documents that were ‘general and useless,’ in terms of the demands of the AG, Rossi said.
Lawyers for the unit owners said they were pleased that the AG is finally pressing forward with the case.
“After litigating against the sponsor for the past three years and jumping over every hurdle they’ve tried to put in our way, it appears through the AG’s proceeding, that there may be an expedited view of the light at the end of the tunnel,” said attorney Steven Sladkus, representing the unit owners. “The sponsor’s failure to obtain a permanent certificate of occupancy and prolonged control of the board is now being addressed by the state.”
The Real Deal last month reported that Boymelgreen’s son Sam has been developing new projects in New York, amid concerns that he is acting as a front for his father’s business. The son is not named as a target of this investigation at Downtown. A spokesperson for the younger Boymelgreen said he has no connection to 15 Broad.