A member of the retail-focused Chera family filed a suit last week seeking $15 million from his former accountant and two others, alleging a long-term pattern of personal and business fraud. The lawsuit also alleges that a $5.5M sale by Michael Chera’s real estate firm was made necessary to pay back-taxes caused by the alleged improprieties.
Chera, in the lawsuit filed on Thursday in New York State Supreme Court, claims an employee stole more than $2 million and cost Chera and the business another $3 million in losses.
Chera filed the suit on behalf of himself and his Manhattan-based company, Allied Property Group. The lawsuit names the firm’s former controller Alan Sills, his wife Janice, and Linda Romano, Chera’s former bookkeeper. Sills and Romano are accused of charges including embezzlement, breach of fiduciary duty and conspiracy. Sills wife Janice was accused of unjust enrichment and other charges.
“While Mr. Chera was working hard doing deals to increase the value of his vast holdings, an insider was taking advantage of him,” Chera’s attorney, Gary Lerner, said in a statement to The Real Deal. “Unfortunately, Sills was placed in a position of trust and turned out to be a bad egg. As many of this city’s most sophisticated real estate investors know, this happens to the best of them.”
Michael Chera is related to the Chera family that owns Crown Acquisitions, but is not part of that company. Chera’s Allied Property owns buildings in Downtown Brooklyn such as the 12,000-square-foot 409 Fulton Street which is home to Shake Shack, and the 114,131-square-foot 523 Fulton Street. Allied sold 440 Fulton Street in 2011 for $5.5 million, but the suit says the sale — executed to raise money to pay back taxes — was only necessary because of the alleged financial improprieties.
This is the second Manhattan suit Chera has been involved in this year. His brother Victor sued him in January over an alleged default on $16 million in loans.
In the lawsuit filed last week, Chera lays out a 22-count complaint enumerating in detail how the accountant and lawyer Sills allegedly stole $2 million over several years. It also details how his wife Janice purportedly benefitted from the gains, and how Romano allegedly acted as a co-conspirator.
The suit claims that Sills last week admitted to some of the allegations. Sills and Romano did not respond to calls for comment.
Chera is asking a judge to order Sills not to spend or transfer the money he claims they obtained illegally. He is also seeking an accounting of the total damages, which he estimates to be $5 million. His lawsuit seeks treble damages, claiming the alleged embezzlement was a particular type of conspiracy. The offices of the district attorneys in Brooklyn and Manhattan had no records last week of criminal charges against any of the defendants. Chera’s attorney Lerner, from the law firm Davidoff Hutcher & Citron, declined to comment about whether his client had filed criminal charges against any of the defendants.
Chera hired both Sills — then working as an attorney at a law firm — and Romano in 2006. The complaint claims Sills overpaid himself by more than $615,000 and took a kickback in exchange for lowering a tenant’s Rent On Fulton Street. The suit also alleges that Sills set up and profited from sham loans, profited from checks written out to “cash;” and overpaid Chera’s brother Victor on a debt for about $114,000.
In addition, the forensic accounting needed to root out the alleged fraud cost Chera more than $800,000.
Chera fired Sills In October 2013 and a month later terminated Romano, the suit says.