New York State Attorney General Andrew Cuomo announced today that his office is suing the developer Yair Levy on accusations Levy and his associates stole millions of dollars from a reserve fund for the residential condo building 225 Rector Place.
Levy purchased the property in 2005 through an ownership entity called YL Rector Street and embarked on a plan to convert it from a rental building. The project did not go well.
Last year Levy defaulted on the property’s $165 million mortgage held by Anglo Irish Bank and the building entered foreclosure. Levy was subsequently sued by a group of buyers at the 304-unit building on a host of allegations, including that he hadn’t finished construction work and had plundered reserve funds that were supposed to have been in place to fix the building’s problems.
The Attorney General’s suit appears to support those allegations. It accuses Levy and his associates of underfunding and diverting millions from what was supposed to be a $7.4 million reserve account. The misuse included withdrawals to pay for personal and business expenses, “including making credit card payments and writing checks to himself and relatives.”
“The Attorney General’s investigation revealed that while developers YL Rector Street, LLC and its principal, Yair Levy, had promised tenants and owners that the reserve fund would be set aside for making repairs, improvements and replacements necessary for their health and safety, they instead depleted the fund leaving residents with a mere $70,” a statement from Cuomo’s office read.
The project was one of several bad real estate deals that Levy was involved in. In partnership with another embattled developer, Kent Swig, he acquired the Sheffield, a rental building near Columbus Circle, in 2005 and began to convert that too into condo units. Last year, after months of distress, the project was removed from their control. Levy also was essentially pushed from the ownership structure of 620 Avenue of the Americas, an office building he had purchased in 2006 with the investors Meyer Chetrit and Charles Dayan, when that building’s debt was restructured earlier this year.
“It is unconscionable that the developer pocketed a fund established to protect residents,” Cuomo said in a statement regarding the allegations at Rector. “Today’s lawsuit sends a clear message to property developers that deception and fraud will not be tolerated. Purchasers and tenants are entitled to full and honest disclosure and must be able to rely on all representations made to them.”
Cuomo’s office is seeking restitution and damages for the theft and to bar Levy from offering real estate securities for sale in New York State, a prohibition that could block him from participating in real estate deals and development projects in the future.