Trump accuses Extell, others of fraud

New York /
Nov.November 03, 2008 11:07 AM

Real estate mogul Donald Trump is accusing the Extell Development Company and the private equity firm the Carlyle Group of orchestrating an unlawful purchase of his 77-acre site on the Upper West Side.

Trump filed papers in Manhattan State Supreme Court last week, and in vaguely worded language he accuses Extell and Carlyle of being involved in the wiring of money to illegally influence his partner the Cheng Group in the sale of the Upper West Side parcel in 2005.

The court documents — which were filed October 28 just days before Extell revealed updated plans for the site, dubbed Riverside South — accuse Extell, Carlyle and others of setting up a $16.5 million payment to influence the $1.76 billion purchase of the property.

While the court papers do not identify who sent the money or who received it, they suggest the money was used to illegally influence the Cheng Group in connection with the sale.

This is Trump’s third legal challenge to the $1.76 billion purchase by Extell and the Carlyle Group of the former Penn Central rail yards. The parcel extends from 59th Street to 72nd Street east of the West Side Highway.

In August 2005, before the November 3 sale was finalized, Trump sued for $1 billion in a 20-count complaint, claiming the Cheng Group — which owned a controlling 70 percent interest in the 77-acre parcel while Trump owned 30 percent — sold the property for approximately $1 billion less than what it could have obtained. Trump filed a similar complaint in federal court in 2005, but withdrew it the same year.

Most of the 2005 complaint was thrown out, allowing the sale to progress. Of the 20 counts, just one is still pending. The remaining item would give Trump the right to review Cheng Group records related to the sale.

Trump’s latest filings — which are referred to as a summons and notice on court papers — says Extell and Carlyle conspired against him through a wire transfer in late 2005. But the papers do not specify who made the transfer and who received it. They simply say the transfer was in the amount of “$16.5 million to the BNP Paribas Bank of London for the purpose of obtaining an unlawful advantage with respect to the purchase” of the Riverside South property.

The court papers further accuse the defendants of causing fiduciary fraud and interfering in contracts, which is known as tortious interference. The documents were filed a week before the three-year statute of limitations for a breach of fiduciary duty claim expires. It was likely done to preserve the right to pursue a legal claim, said Terrence Oved of Oved and Oved, who is not involved in the case.

The Trump Organization and the Carlyle Group declined to comment. Extell did not respond to a request for comment, and the Cheng Group could not be reached for comment.

Extell presented plans Thursday night for four residential and one mixed-use building on an eight-acre site between 59th and 61st streets, the Observer reported.


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