New York Attorney General Settles Inquiry Into Once-Successful Developer
August 30, 2016
As published in the NY Times on August 29, 2016.
The New York attorney general said on Monday that his office had settled a long-running investigation into the business practices of Shaya Boymelgreen, a once-high-flying developer whose collapse during the recession left a trail of irate condominium owners, partners and lenders.
Attorney General Eric T. Schneiderman said the agreement would put “an end to Mr. Boymelgreen’s perpetual fraud and abuse in New York City real estate securities.”
The investigation involved his sale of condominiums in Brooklyn and Manhattan, unfinished work at six of those projects, and his refusal to fix construction defects.
Under the terms of the agreement, which was reached earlier this month, Mr. Boymelgreen agreed to resolve building violations and construction problems at six properties he developed, including a 409-unit condominium at 20 Pine Street in Lower Manhattan; Beacon Tower, a 79-unit condo at 85 Adams Street in Dumbo, Brooklyn; and Newswalk, a 137-unit condo in a former Daily News printing plant in Prospect Heights, Brooklyn.
Mr. Boymelgreen is barred in New York from participating in the offer or sale of securities, including condos, for two years. If he fails to adhere to the settlement, he will be permanently barred from selling apartments in New York. Mr. Boymelgreen’s partners Itzhak Katan and Domenick Tonacchio are also covered by the settlement.
Mr. Boymelgreen’s lawyers did not returns calls for comment.
The investigation dates to 2013, but condo buyers in Mr. Boymelgreen’s buildings began filing lawsuits as early as 2007. Residents complained of unfinished work, widespread leaks and a lack of fireproofing. At Newswalk, condo owners had to spend an additional $8 million “in order to make the building habitable,” said David L. Berkey, a lawyer for the condo board, which sued Mr. Boymelgreen and his partners.
Mr. Berkey said he was hopeful that the attorney general’s settlement would quickly lead to a settlement with his clients. Mr. Boymelgreen’s offering plan for Newswalk in 2002 indicated that the apartments would generate $127 million. “There should be enough proceeds to enable a settlement,” Mr. Berkey said, “unless it’s been lost on other bad deals.”
Born in Israel, Mr. Boymelgreen, 65, immigrated to the United States in 1969, where he initially worked in the field of asbestos abatement. He gradually took on real estate projects before forming a partnership with the Israeli businessman and diamond merchant Lev Leviev in the early 2000s.
With Mr. Leviev’s financial backing, Mr. Boymelgreen expanded rapidly, converting industrial buildings into residential complexes and developing apartments. He opened a New York bank, LibertyPointe, and pushed into real estate markets in Israel, Las Vegas and Miami.
His partnership with Mr. Leviev ended in acrimony in 2007. The real estate market collapsed shortly after. Regulators closed his bank in 2010, and he was evicted from his Brooklyn office. Lawsuits piled up at his doorstep.
In January, the attorney general settled with Mr. Leviev and his company, Africa Israel Investments, over unfinished construction and shoddy workmanship at 15 Broad Street and 20 Pine Street, both in Lower Manhattan, and at 85 Adams Street in Brooklyn. According to the attorney general’s office, after selling out the units at 15 Broad and collecting at least $360 million in 2008, the partners abandoned efforts to finish the work and drained the escrow funds, while assuring buyers that the money had been set aside.
Mr. Boymelgreen has settled with the condo boards for 15 Broad and 20 Pine for undisclosed sums.
Steven D. Sladkus, a lawyer who represents 85 Adams, as well as two other buildings, is hoping that mediation will bring the matter to a close. “People have been turning over rocks trying to seek redress for their claims against him,” Mr. Sladkus said of Mr. Boymelgreen.
Mr. Schneiderman, a Democrat, said of the settlement, “We hold every developer to the same set of rules, and when any developer flouts them, they will face serious consequences, just like Mr. Boymelgreen.”