Developer and Terra Holdings Co-Chairman Kent Swig, has filed suit against an asset management firm for withholding nearly all of his compensation after a restraining order was issued to enforce a multi-million dollar judgment by Square Mile Structured Debt.
Swig filed suit Sept. 24 against Manhattan-based Properties Asset Management Services in New York State Supreme Court, alleging the firm is withholding his compensation after Square Mile sent a subpoena requesting information about Swig’s salary and other compensation at Terra. No information was immediately available on the current amount of Swig’s compensation.
Square Mile, a Manhattan-based hedge fund, was awarded a $32.4 million judgment against Swig in July, after Swig defaulted on a $28.4 million loan, plus $4 million in interest. On Aug. 13, Terra Holdings, the parent company of residential brokerages Halstead Property and Brown Harris Stevens, was served with a subpoena to hand over salary and other compensation details.
According to the complaint, subpoenas have gone out to other Swig-related entities gathering information on Swig’s compensation and assets.
As The Real Deal first reported, Swig threatened to file for bankruptcy protection if the judgment was enforced against him. Square Mile filed suit in late 2008 after Swig defaulted on the loan, which was used to help develop his Sheffield57 condominium conversion. Besides Square Mile, Swig is facing millions of dollars in judgments for personal guarantees and credit lines from Lehman Brothers, Signature Bank, Citibank and other lenders.
Swig and his partners acquired the Sheffield for a record $418 million in 2005, however lost control of the building in August 2009 after defaulting on millions of dollars in senior and mezzanine loans.
According to Swig’s complaint, Properties Asset Management Services first entered into an agreement in March 1995 with BHS Holdings, which was later acquired by Terra Holdings. Under Swig’s agreement with the company, he received a share of funds paid to Properties Asset Management Services for its work.
Swig is one of four co-chairmen at Terra Holdings, including David Burris, Arthur Zeckendorf and William Zeckendorf. Swig’s lawsuit alleges that Properties Asset Management has withheld 90 percent of Swig’s compensation since the subpoena was issued, while continuing to pay the other managers compensation.
“[Property Asset Management Services’] sole justification in withholding the payments is that it is barred from doing so by the restraining notice served on Terra Holdings,” Swig attorney Y. David Scharf, wrote in the complaint.
In court documents, Scharf stated that the subpoena and restraining notice went to Terra Holdings and not Property Asset Management Services, which he claims would allow the firm to release Swig’s compensation. He later noted that: “Swig desperately needs these funds in order to pay, among other expenses, his legal counsel and his restructuring advisors.”
Square Mile attorney Jim Perkins, disputed Scharf’s legal argument, in a phone interview with The Real Deal, saying the restraining notice would compel Property Management from withholding payment even though it was sent to Terra.
Neither Swig nor his attorney Scharf was immediately available. Terra Holdings officials were not immediately available.