Westchester developer files for bankruptcy — twice — to fight arbitration award

Construction manager’s claim led to millions of dollars in payout — which is now up in the air

New York /
Jun.June 01, 2021 06:00 PM
John Fareri and Villa BXV (Getty, Facebook/VillaBXV)

John Fareri and Villa BXV (Getty, Facebook/VillaBXV, iStock)

The developer of a Westchester condo project has now filed two bankruptcy petitions in an attempt to avoid paying millions of dollars to his former construction manager.

John Fareri of Fareri Associates, the developer of the 53-unit Villa BXV complex in Bronxville, filed for Chapter 7 bankruptcy in late May on behalf of Gateway Development, an entity that was established to manage construction of the condo complex. Fareri owns a 51 percent stake in Gateway Development, with the remaining share owned by the construction manager, James Carnicelli.

And less than two weeks earlier, Fareri filed a separate Chapter 11 bankruptcy petition on behalf of another entity, Gateway Kensingon, which he created to sponsor the condo complex. Villa BXV was completed in 2017, but the sponsor still owns at least seven units, most of which have been rented.

The bankruptcy filings were prompted by a recent $14.3 million arbitration award that was issued in response to a claim by Carnicelli.

The dispute stems from $6.3 million in tax credits that Fareri received under the state Department of Environmental Conservation’s brownfield cleanup program for rehabilitating the once-contaminated site that now houses the residential complex.

After Fareri claimed the tax credits in 2018, the state Department of Finance asked for documents to substantiate the claim. His company prepared invoices to show the costs of remediation and condo construction.

But Carnicelli challenged the bills, arguing that they amounted to more than he was paid and that he should receive the difference — of millions of dollars. In response, Fareri fired Carnicelli.

Carnicelli then brought the case to the state Supreme Court, requesting arbitration. During that process, Fareri said he was not aware of the gap between the actual costs and the costs spelled out in the invoices. But arbitrators ultimately issued a $14.3 million award, including a $12.7 million payment from Gateway Kensington to Gateway Development. As a 49 percent owner of Gateway Development, Carnicelli would receive more than $6 million.

But with Gateway Kensington petitioning for restructuring under Chapter 11, and Gateway Development seeking to liquidate under Chapter 7, the fate of those millions is now up in the air.

A Fareri Associate spokesperson said in a statement that the Chapter 7 filing aims to move the dispute from the state court to the federal bankruptcy court, “which has the experience and expertise to handle complex business matters with the goal of arriving at a favorable resolution.” The spokesperson said the filing has no impact on the company’s other businesses.

Carnicelli’s attorney declined to comment, citing pending litigation.





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