Attorney General Andrew Cuomo has quietly settled a five-month investigation in which developer Alexander Gurevich has been banned from selling condominium and cooperative units in New York state for three years, will pay a $300,000 fine and was separately forced to offer refunds to all buyers at the Alexander condo on the East Side, The Real Deal has learned.
Cuomo entered a so-called assurance of discontinuance with Gurevich Feb. 18, after launching a probe in September 2009, amid allegations that the sponsor of the building at 250 East 49th Street failed to disclose key information about the principal investors from prospective buyers.
Attorney Andrew Weltchek, who represented four buyers that filed suit in federal court against the developers, said he complained to the AG about several “defects” in the offering plan, leading Cuomo’s office to investigate further.
“The attorney general investigated that and figured out there were additional disclosures that had to be made,” Weltchek said. “In the meantime, the clock ran out on the [Jan. 1] date the sponsor projected the project had to be closed.”
Besides Gurevich, other investors in the property included Gene Kiselman, Eliot “Eliyahu” Spitzer[not the former governor] and Michael Steinberg. A spokesperson for the AG’s office did not have any comment on the case beyond the written agreement.
Cuomo found that the building’s sponsor firm, 250 East Borrower, failed to disclose several key pieces of financial information in the offering plan, and the first seven amendments to the offering plan, including the following:
The sponsors failed to disclose that Gurevich, a practicing attorney, was a principal of 250 East Borrower and the “sole signatory” of the escrow agent, where buyers place their deposits when buying a new apartment.
Buyers were never told that Gurevich was also the principal of Trans Continental Abstract, the title company that was recommended to buyers. They were also not told that Gurevich was the sole principal of Continental Funding, the mortgage lender recommended by the sponsor.
Gurevich also owned a stake in Continental Realty, a firm that issued an opinion letter certifying the adequacy of the building’s common charges. Gurevich failed to sign a certification by sponsor, in which a developer swears that statements in the offering plan are true.
The sponsors failed to disclose that Gene Kiselman was a principal of 250 East Borrower and he failed to sign a certification by sponsor.
Gurevich and Kiselman did not return calls for comment, despite promising to do so. Steinberg and Spitzer were not immediately available for comment. Lawyers for the sponsor were not immediately available for comment.
The AG settlement says the agreement indicated that the sponsors must continue to fulfill their obligations at their existing condos at 2523 Ocean Avenue in Brooklyn, 4102 13th Avenue in Brooklyn and 802 Avenue U in Brooklyn.
According to the settlement, all escrow funds have either been returned to buyers or transferred to the account of D’Agostino, Levine, Landesman & Lederman. A new amendment, released Feb. 18, says that Peter Silverman, a founding partner of Silverman Schlar Shin & Byrne, is being appointed sole manager of the sponsor, replacing Gurevich.
The date of the anticipated first closing was changed to March 1, 2010, however it is unclear whether any units have closed. A new rescission offer will be made if the first unit closing is delayed 12 months for buyers who purchase apartments after the Feb. 18 amendment.