HFZ Capital has pleaded guilty for its role in an alleged $86 million development fraud and is blaming its former No. 2, Nir Meir.
The defunct New York City development firm along with an affiliate admitted to three counts of grand larceny in the first degree and criminal city tax fraud during a Criminal Court hearing Friday in Lower Manhattan.
HFZ Capital was sentenced to an unconditional discharge, meaning there will be no fine or any tangible punishment. HFZ chairman and founder Ziel Feldman has not been charged with wrongdoing.
Law360 first reported the news.
HFZ Capital, once one of New York’s marquee luxury developers, said in its plea agreement that Meir was a “high managerial agent” of the firm between October 2019 and March 2020. During this time, HFZ asserted, Meir worked with co-defendants to steal more than $1 million from the lender funding the XI, a $2 billion condo project beside the High Line, by fraudulently inflating costs of subcontractors working on the project.
“The corporations that Nir Meir corrupted and destroyed are pleading guilty,” said attorney Charles Clayman of Rosenberg Kirshner & Linder, who represents HFZ, in a statement to The Real Deal.
The Manhattan D.A. alleges Meir masterminded the fraud, illegally diverting $256 million of loan funds set aside for the XI. When Meir returned the funds to XI accounts, a $37 million shortfall remained. To make it up, the D.A. alleges, Meir worked with the XI’s contractor, Omnibuild, to inflate costs reported to the lender.
Meir’s attorney, Oliver Storch, said that HFZ and Meir were not synonymous.
“HFZ was once considered a visionary real estate development company, which has now shifted all blame onto Nir Meir, once the company’s deals weren’t successful,” he said.
Omnibuild and three of its people, including former co-CEO John Mingione, have pleaded not guilty. Omnibuild has claimed to be a victim of Meir and HFZ.
Meir has also been charged with defrauding the city out of $15 million in property taxes. The D.A. alleges Meir directed HFZ accountants to start property tax payments, but then cancel them before the money could be withdrawn.
Meir has pleaded not guilty. The former HFZ executive was arrested and extradited to New York from Florida in February and has been jailed in Rikers Island ever since. At his first hearing, Meir said he had been an upstanding citizen his entire life and had only run into financial problems during Covid.
Storch attempted last week to get his client’s bail lowered from $5 million cash and $15 million partially secured to $250,000. New York Supreme Court Judge Ann Thompson denied the request, but asked Meir’s attorney to come back with a legitimate bail package that would show where the funds would come from.
“We ask the public to withhold judgment until the case is completed, until all the facts have been presented in the appropriate forum,” Storch previously said in a statement to TRD.
HFZ is the second defendant to plead guilty in the D.A.’s wide-ranging investigation. Former HFZ employee Louis Della-Peruta admitted in May to one misdemeanor charge of falsifying business records and was fined $1,000.
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