Shvo Wins Dismissal of Mandarin Oriental Fraud Claims

Developer Michael Shvo is almost off the hook at the Mandarin Oriental.

A judge in New York Supreme Court last week dismissed claims brought against Shvo and his companies by two condo owners at his Mandarin Oriental Residences, who had alleged fraud and shoddy construction.

The judge’s dismissal likely takes some pressure off Shvo, who has been dealing with numerous lawsuits and disputes in the past year.

“We are pleased that the Court dismissed the overwhelming majority of plaintiffs’ claims, including all claims against Michael Shvo personally,” Shvo attorney Morris Missry said in a statement. “The decision confirms our long-held view that this lawsuit lacked merit and represented an effort to pressure our clients into paying a settlement to which plaintiffs are not entitled.”

Attorneys for the plaintiffs at the law firm Kasowitz did not immediately respond to a request for comment Monday.

The Mandarin Oriental condos at 685 Fifth Avenue, redeveloped from the former Gucci Building, are at the center of the suit. Shvo launched the sponsor company in 2018 in partnership with Turkish investor Serdar Bilgili and other entities.

But two years later, Bilgili brought a case against Shvo, alleging the developer had misused project funds for personal expenses. The parties settled out of court and Bilgili left the project.

The two condo owners, John and Diane Goodman, argued that the sponsor should have told buyers about the allegations from Bilgili and the history of arbitration.

They also alleged that the condos were substandard and didn’t live up to marketing materials and the offering plan. The Goodmans’ one-bedroom unit, which they purchased for $6.1 million, was allegedly riddled with construction defects, such as dysfunctional heated floors and malfunctioning doors, they said.

The Goodmans also complained that the building was not up to the luxury standards presented by marketing materials. Lobby carpeting and furniture featured “unsightly stains.” A rooftop pool contained “visible algae” and was closed by the city’s health department. The Goodmans’ unit was allegedly robbed twice, and the pair say they found roaches coming from vacant units. A restaurant from chef Daniel Boulud was “understaffed and poorly managed,” according to the complaint.

Shvo personally used the building’s common areas for parties, including a late night concert in the restaurant and a children’s pool party on the roof, the plaintiffs said.

The judge said Shvo and his companies had not misrepresented facts related to the Bilgili situation as much as omitted facts that the plaintiffs wish had been disclosed. That however does not give the Goodmans the legal foundation to sue. Similarly, the judge found that assurances that the condos would be “turnkey luxury” and “finished to Mandarin standards,” were opinion or “puffery,” meaning they can’t underpin a fraud claim.

The judge did confirm that the Goodmans’ effort to unwind its purchasing contract with the sponsor can move forward. Other claims against the resident board and Mandarin management were unaffected by the judge’s decisions.

As of February, the residences had only sold one-third of its 65 condo units since it launched in 2021. A Serhant team took over sales in the building and cut prices.

Shvo is likely relieved to have a legal situation off his plate. He has spent the last year battling members-only Core Club in court over allegations that he didn’t follow through on investment and construction promises. A judge dismissed Core Club’s primary fraud and racketeering claims against the developer earlier this year.

In May, Deutsche Finance America alleged that Shvo got a $79 million payout from the sale of the San Francisco Transamerica Pyramid, while it got nothing. DFA sued German pension fund manager Bayerische Versorgungskammer over the situation in federal court.