The Real Deal New York

Corcoran fined $70K for unlicensed agents

Firm penalized for 79 licensing irregularities following complaint from unhappy buyer

February 28, 2011
By Adam Pincus

The New York State Department of State quietly fined the Corcoran Group $70,000 this past June as a result of a 2006 complaint filed by an unhappy co-op buyer who discovered that dozens of the firm’s agents were working without licenses, The Real Deal has learned.

A state investigation prompted by the complaint found that 79 brokers and agents — including several top producers at the firm — had licensing irregularities.

Corcoran admitted it violated state law through an agreement known as a consent order, signed in June, that said from the start of 2006 to the end of 2007, 44 of its approximately 900 agents were unlicensed. An additional 17 were licensed but not through Corcoran, and 18 were working as agents under names that were not licensed.

Among those who did the most deals without proper licensing were Carrie Chiang, who until April 2007 completed 27 sales while not licensed with Corcoran as required, though she did have a valid broker’s license the entire time; Olya Kovacevic (now with Prudential Douglas Elliman), who completed 36 sales also while licensed, but not under the name Olya Neville that she used at Corcoran; and Carolyn Fuchs, who completed 27 sales while unlicensed, state records showed.

When asked about the fine late last month, the firm said that the situation was long behind it and that they were clerical mistakes. In the consent order, the company blamed the errors on a licensing coordinator, who “failed to diligently execute his responsibilities.”

“This pertains to administrative errors that we resolved four years ago to the satisfaction of the State of New York,” the firm said in a statement. “We have been and continue to be in good standing with the state. All of our real estate salespersons and brokers are properly licensed, affiliated, associated and/or registered with the Department of State, and our stringent policies and procedures continue to ensure this remains the case.”

The consent order the firm signed was one of 202 similar consent orders issued last year by the state agency tasked with granting and overseeing enforcement of real estate licenses. That figure includes all professions the state oversees, such as appraisers and security guards, not just real estate agents. A breakdown of agents was not immediately available.

Not all state investigations end in findings of guilt. Last year the agency decided against bringing charges against retail brokers Jeffrey Winick, CEO of Winick Realty Group, and Cory Zelnik, CEO of Zelnik & Company. The Department of State opened an investigation in May 2010 over whether they paid taxes on a cash commission paid in about 2000. The agency concluded its investigation in September, a State Department spokesperson said.

The manner and severity of Department of State punishments is on the minds of some in the real estate industry in Manhattan, following a decision by the agency last month to open a new investigation into unlicensed agents.

That decision was prompted by an article on The Real Deal‘s website that found that several firms had unlicensed brokers or brokers with expired licenses. They included the head of the Brooklyn office of commercial brokerage Massey Knakal Realty Services, Kenneth Krasnow, as well as Jonathan Hageman, the sales manager for company chairman Robert Knakal.

Hageman obtained his renewal license last month, but Krasnow — who was temporarily removed from his post by Massey executives — had not as of late last month.

Meanwhile, Eastern Consolidated had two agents who for a brief period had expired licenses, which have since been renewed, and three inactive agents at Gumley Haft Kleier were not licensed, and were removed from the company’s website.

In the Corcoran case, the state launched the investigation after co-op apartment buyer Mimi Fuhrman filed a complaint in 2006 alleging that listing broker Jeffrey Joseph was not licensed when she closed on the purchase of her Gramercy Park unit. She filed another complaint in 2007 alleging that 100 brokers at the firm were not properly licensed. Licensing status is publicly available on the state Department of State’s website.

The Corcoran consent order was provided after a request from The Real Deal about the status of Fuhrman’s complaint. It was unclear at press time whether any other New York City brokerages had recently signed a state consent order for similar licensing violations.

Attorney Jeffrey Arouh, a partner in the real estate department of Holland & Knight, who was not involved in the Corcoran case, said the state’s $70,000 June fine appeared to be a light punishment. He speculated that the state could have sought a much larger settlement.

Arouh, who reviewed the consent settlement for The Real Deal, said the agreement did not appear to prevent someone who had paid a commission to one of the improperly licensed brokers from suing to recover it along with any other damages that might be allowed by state law.

“From the public-policy point of view, I would say the state did not perform well here,” he said. “It is a remarkably low penalty for violations like this because it meant they were collecting huge commissions and paying them and splitting them with unlicensed brokers,” he said.

He added, “You want to call this a tap on the wrist instead of a slap on the wrist?”

Agency spokesperson Daniel Shapiro said the Corcoran agreement advanced the goals of the agency, which are “to promote trustworthy and competent practice by those who are licensed by us. We believe that the resolution of this matter accomplishes that.”

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