Brooklyn developers charged with criminal 421a fraud

Manhattan DA says six wrongfully received $1.6Min benefits

(Photo Illustration by The Real Deal with Getty)
(Photo Illustration by The Real Deal with Getty)

Six Brooklyn developers and their companies face criminal charges for allegedly cheating a property tax break program and fraudulently receiving more than $1.6 million in benefits.

Manhattan District Attorney Alvin Bragg on Wednesday announced indictments against Alen Paknoush, Mendel Gold, Joel Kohn, Michael Ambrosino, Gheorghe Sita and Ioan Sita on charges that they lied to state officials about renting apartments at affordable rates while receiving the property tax break 421a.

They were charged with tax fraud, larceny and falsifying documents.

Civil cases against 421a recipients have been common in recent years, but criminal charges are rare.

The cases announced Wednesday involved seven apartment buildings in Brooklyn. Prosecutors said the landlords certified to city and state officials that they had set aside apartments as affordable, but rented them out at market prices.

For example, Paknoush told the city’s Department of Housing Preservation and Development that five of the 23 units at 682 Bushwick Avenue would be affordable, according to court documents. The rent limits for those apartments were $926 for a one-bedroom and $1,042 for a two-bedroom, but Paknoush allegedly charged between $1,900 and $2,700.

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The 421 program, which ended for new projects in June, grants substantial property tax abatements for New York City multifamily projects that meet certain criteria, including affordability. Between 2017 and 2020, Paknoush and his company received more than $435,000 in tax benefits.

“Not only did they illegally charge substantially higher market rents for years, but they did so while personally reaping the benefits of generous property tax abatements,” Bragg said in a statement.

This is not the first time Paknoush has been accused of violating the tax break’s terms. A 2016 ProPublica story noted that he and many others failed to register units as rent-stabilized in a building receiving 421a.

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The 421a tax break requires that developers set affordable rents for a certain percentage of units, limited to applicants within various income bands, for the duration of the tax break — 35 years.

State officials are expected to consider replacing the program during the next legislative session. A proposal championed by Gov. Kathy Hochul failed to gain traction this year.

The indictments come one week after Bragg announced his office’s first Housing & Tenant Protection Unit, which will focus on tenant harassment and abuse of government programs by landlords and developers. It is one of several such units maintained by city and state agencies.

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