A state Supreme Court judge ruled that developer Yair Levy defrauded the Rector Square condominium
in Battery Park City and spent $1.6 million in reserve fund money on personal and other illegal expenses,
which could possibly lead him to being banned from the real estate business.
Former New York Attorney General Andrew Cuomo filed a massive $7.4 million civil suit against Levy in 2010 alleging Levy misappropriated the reserve fund money at the 303-unit tower, signing over checks to his own family members and using the funds to pay credit card and cell phone bills.
Judge Joan Lobis, in a rebuke of Levy’s defense, said the developer failed to present any credible evidence to support his claims that the expenditures were legitimate.
“Aside from the bare denials…there is not one scintilla of evidence submitted with the answer to contradict or challenge the petition,” Lobis wrote in her order. “The documents submitted in this supplemental filing are without probative value as, for the most part, they are disorganized, vague, presented without any context and unaccompanied by any affidavit of a person with knowledge of the facts.”
“Yair Levy treated the Rector Square condominium as his personal ATM, using the millions of dollars intended for residents for his own purposes, even while the building conditions declined,” said Attorney General Eric Schneiderman. “This kind of misconduct will not be tolerated, and I will continue to hold those who defraud tenants and owners accountable.”
Levy’s lawyers have argued in the past that he was forced to spend some of the reserve money because Anglo Irish Bank shut down his construction funds in 2008, before the bank filed to foreclose on the building.
As The Real Deal originally reported, construction workers walked off the job at Rector Square and Levy defaulted on his $165 million in mortgage loans, plus failed to pay taxes and pilot payments to the Battery Park City Authority and improperly sold apartments for extended-stays and student apartments for an Italian college.
The unit owners later filed a $100 million lawsuit against Levy, broker Michael Shvo and others alleging fraud.
By the end of 2010, the bank foreclosed on the property and sold the unsold shares to the Related Companies, the original developer of the building.
Levy referred all questions to his counsel. His attorney told The Real Deal that Levy disagrees with the ruling, but is working with the unit owners to restore money to the reserve fund.
“Yair Levy’s obligation under a condominium offering plan goes beyond an attorney general proceeding,” said Rex Whitehorn, attorney for Levy. “We’ve constantly been in contact with the attorney [for the building’s unit owners] and the board.”
“We were instrumental in working out a deal with Related to put up the very money that this order by Judge Lobis is looking to resolve.”
The unit owners said they are happy with the ruling; however, they are still in heavy discussions with AG Eric Schneiderman’s office and Levy’s lawyers about whether Levy will have to pay restitution to the state or pay the unit owners directly.
“The unit owners are pleased with the court’s determination that Mr. Levy’s actions at 225 Rector in converting the reserve funds and not fulfilling his financial obligations are both inexcusable and indefensible,” said Marc Held, attorney for the Rector Square unit owners, who strenuously denied that Levy helped negotiate the deal with Related. “The unit owners hope that the former sponsor will now make restitution for his actions.”
Levy could face a ban from selling real estate in New york, plus the $7.4 million judgment, which would involve the potential seizure of its assets. However Levy’s lawyers argue that this case should not disqualify Levy from the real estate industry.
“What they’re claiming he did is not something that should bar someone from selling condominiums,” Whitehorn told The Real Deal.