Mark Nussbaum Files ABC to Repay Creditors

The financial mess surrounding New York City real estate attorney Mark Nussbaum continues apace.

Facing down creditors to the tune of tens of millions of dollars, Nussbaum’s law firms Nussbaum Lowinger and Mark J Nussbaum Associates filed a petition in New York Supreme Court to start a process known as an Assignment for the Benefit of Creditors (ABC). The process is an alternative to bankruptcy, considered a faster and less bureaucratic process than Chapter 7 or 11.

Nussbaum’s financial woes started earlier this year. He used his law firm’s escrow services as a pass-through to provide bridge loans to real estate dealmakers. Nussbaum raked in a fee. His clients made money. And real estate owners scored quick money to close deals.

But at some point, Nussbaum started running a deficit. A nursing home exec named Jacob Sod filed a lawsuit demanding Nussbaum return $15 million in escrow money. Others followed suit. Nussbaum shut down his law firm in January.

Things turned more serious in May, when the Manhattan District Attorney’s office charged Nussbaum with grand larceny, alleging he took over $15 million in client escrow money. The D.A.’s office said it suspects there may be additional victims. Nussbaum has pleaded not guilty and is out on a $500,000 bond.

But Nussbaum, who worked with some of the tri-state’s largest dealmakers, including Shaya Prager and Joel Schreiber, is seeking to resolve some of his issues with former clients via the ABC process.

Nussbaum reportedly still has tens of millions of dollars owed to him on loans he made. If he can collect on those, he could repay at least some of his creditors.

Details about Nussbaum’s total debts and assets remain a mystery. An ABC is not overseen by a bankruptcy judge, but rather an “assignee” who acts as a liquidator and is appointed by Nussbaum.

While the ABC is commenced through the New York state court system, the process is generally considered to be more private than bankruptcy, in which a company is required to open all its books and records.

Attorney Sheldon Eisenberger is the proposed assignee and can go after Nussbaum’s outstanding accounts receivable and commence lawsuits.

In Nussbaum’s proposed ABC, the assignee will begin distributions to creditors after the first $10 million has been collected.

This process could include going after any debts owed by the estate of the late Mendel Steiner, with whom Nussbaum once allegedly worked closely. Steiner died by suicide in January as lawsuits started piling up. Nussbaum’s attorney has alleged the $15 million from Sod went to a company affiliated with Steiner.

Nussbaum has previously filed suits against individuals he claims owe him money.

Nussbaum’s attorney Ethan Kobre of Schwartz Sladkus Reich Greenberg Atlas is pursuing Simcha Feller of Yes I Can Educational Support Services for $2 million. He also filed a suit against Lakewood-based Betzalel Tzali Gombo for $500,000.

Enter: the Wolf

One big question at the center of the dispute is where $15 million ended up. The involved parties have different theories.

Nussbaum claimed the $15 million he received from Sod went to a property associated with Steiner. But as Nussbaum battled criminal and civil lawsuits, Sod launched a campaign against another person he alleges received the $15 million in escrow funds.

According to Sod, he allegedly provided the $15 million to Nussbaum for “show capital,” according to a lawsuit filed in Rockland County. The scheme worked thus: Nussbaum allegedly used “show capital” as a tactic to temporarily deposit money into a real estate dealmaker’s account to make it appear as if the investor was capitalized. The money would be returned to the investor with interest and Nussbaum would collect a fee.

But Sod alleged the money he gave to Nussbaum never arrived back in his account. And Sod’s company Crestview 360 filed an explosive lawsuit in Kings County Court in February against Brooklyn dealmaker Wolf Wercberger, claiming it was Wercberger who took Sod’s money.

According to Sod’s lawsuit, Wercberger allegedly told Sod he received a wire from Nussbaum, but the money was “for a deal.” Sod claimed the wire was actually “hush money.”

Sod alleged Wercberger threatened Nussbaum that he would go to authorities to inform them about Nussbaum’s “financial improperties.”

Crestview’s attorneys filed 26 subpoenas against banks and financial institutions seeking to find more information about Wercberger’s accounts.

After that, Sod and Wercberger engaged in a legal war, leveling accusations against each other.

Wercberger’s attorney John Lonuzzi called the subpoenas a “blatant abuse of subpoena power.”

In a filing, Wercberger himself claimed Sod’s attorneys were “running all over town, intimidating all of my business contacts and associates.”

Nussbaum said Sod’s allegations were false and the money went to the company associated with Mendel Steiner.

Lonuzzi sought sanctions against Sod’s attorney Israel Goldberg. He also sought to hold him in contempt of court for providing false information to the court.

Goldberg denied the allegations and said in a filing that “Wercberger has, through his attorney, made and continues to make every effort to distract this court from the real issue at hand.” In this case, Wercberger was the “recipient of $15,000,000 that was deposited into Nussbaum’s escrow.”

On June 27, a Kings County judge dismissed Sod’s case.

Lonuzzi said he is pleased the court dismissed the plaintiff’s “frivolous claims.”

“We are still pursuing the pending contempt motion against the plaintiff’s attorneys,” said Lonuzzi. “Additionally, Mr. Wercberger is giving serious consideration to a lawsuit to address the reputational and financial harm caused by the commencement of this utterly baseless lawsuit.

Sod’s attorney did not return a request for comment.