A State Supreme Court judge ruled today that Attorney General Andrew Cuomo can proceed in his civil suit against developer Yair Levy, who is facing banishment from future condominium unit sales after he allegedly misappropriated millions of dollars from the Rector Square reserve fund.
Cuomo sued Levy, alleging that the man formerly known as the “condo king” illegally withdrew $1.6 million in reserve funds at the 303-unit building in Battery Park City, and signed over checks to family, while using the money to pay credit card bills at Macy’s and Verizon Wireless.
Levy was required to deposit 3 percent of each sale into the reserve fund, which is designed to protect condo and co-op buildings in case urgent capital improvements or emergency repairs are needed. The judge noted that Levy, when he represented himself in court, initially claimed that he deposited nearly $1.6 million into the reserve fund, then changed his story when he hired lawyers.
“Levy baldly asserted that these funds where then used, as permitted, to make capital repairs, replacements and improvements needed for the safety and health of the residents with the approval of the condominium board,” the judge wrote.
The judge said the evidence provided by Levy’s lawyers, and an accountant who presented evidence purporting to back up Levy’s assertions, instead show contradictory evidence and that some of the legal arguments made by Levy’s team were “recent fabrications.”
Cuomo’s suit demands that Levy pay $7.4 million to restore the reserve fund and compensate unit owners. The suit also seeks to banish him from selling condos in New York State. The theft of reserve fund money is a crime in New York City, but it is unclear whether Levy will be charged criminally.
The district attorney’s office said there are no criminal charges against Levy and added that they could not comment on whether there was an active investigation.
Marc Held, attorney for 46 unit owners at Rector Square, said his clients were pleased by the ruling, which demonstrated that the AG does have the proper authority to enforce the funding of the reserve fund.
“Clearly, a sponsor should be held fully accountable when he raids a segregated reserve fund account designated for the benefit of unit owners in order to pay for his personal Macy’s and American Express credit card bills,” said Held in an e-mailed statement. “Basically, Mr. Levy went for the grand slam, but struck out instead!”
Anglo Irish Bank filed to foreclose on the property in February 2009, and recently acquired the defaulted debt at auction. The bank, which is facing a possible liquidation due to the collapse of the Irish bond market, is planning to sell the property to a new owner, possibly Related Cos., which has managed the property under a court-appointed receiver since mid-2009.
Starr and Associates attorney Andrea Roschelle, who represented Levy, was not immediately available for comment and nor was Dewey & LeBoeuf attorney Stuart Saft, whose firm represented Levy during the conversion of the building. Cuomo’s office did not respond to a request for comment.