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Days after a trustee approved the $96 million sale of Michael Lichtenstein and Toby Moskovits’ Williamsburg Hotel, the property’s former accountant is in hot water.
A federal judge is holding Daniel Norensberg and his Long Island-based accounting firm in contempt for failing to comply with subpoenas to produce information about the bankrupt hotel’s affairs. Norensberg has been ordered to pay $500 per day until he complies.
A court-appointed trustee is seeking the information as he investigates Lichtenstein and Moskovits’ financial maneuvers at the posh hotel at 96 Wythe Avenue, which the developers put into bankruptcy in 2021 to fend off a foreclosure attempt by lender Benefit Street Partners.
The bankruptcy proceedings have certainly been contemptuous.
The developers accused their lenders of a predatory attempt to seize control of the hotel, while Benefit Street accused Lichtenstein and Moskovits of siphoning money from the project.
Things got uglier when the developers were stripped of oversight of the hotel after an independent examiner alleged that “substantial amounts” of hotel revenue was moved from the debtor entity into different accounts controlled directly or indirectly by Moskovits and Lichtenstein. The examiner further alleged that the debtor did not file tax returns for 2017, 2018 or 2019 and submitted an unsigned return for 2020.
Lichtenstein maintained that any cash transferred from the debtor entity went to paying the hotel’s expenses and payroll.
The bankruptcy trustee, Stephen Gray, then zeroed in on Norensberg, who Gray alleges was the one responsible for handling the tax returns between 2017 and 2020. Gray has been seeking to collect those returns, along with other financial information and all communications about the debtor’s affairs, assets, liabilities and transfers.
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Norensberg failed to meet an Oct. 4 deadline to respond to the subpoena, court filings show. Two days later, the trustee served a letter to Norensberg demanding compliance.
More than a month later, on Nov. 16, Norensberg sent an email to the trustee’s lawyers suggesting he would comply. He was provided with a file-sharing link for the documents, but never uploaded any.
In early December, Norensberg wrote in an email to the court that he would “promptly upload the files I have.” A day later, he produced electronic copies of the debtor’s federal and state tax returns for the years in question, but not other documents sought by the trustee. Norensberg failed to show up to a court hearing later that month, leading to the contempt charges.
“Norensberg’s failure to comply slows and impedes the Trustee’s investigation of the Debtor’s affairs, assets, liabilities, and transfers, and it materially increases the costs of that investigation and impairs estate value,” Gray’s attorney wrote in a filing.
Last week, the trustee selected hotel operator Quadrum Global’s bid to acquire the 147-key property in an auction. The sale is expected to close in March.
Norensberg did not return a request to comment. An attorney for Lichtenstein and Mostkovits also did not return a request to comment.