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Luxe Developer Ordered To Stop Selling Condos in New York

Friday, February 28, 2014

WNYC
A chandelier in the lobby of 15 Broad Street. (Wikimedia Commons)

Developers of the old JP Morgan Co. building are under investigation by New York State Attorney General Eric Schneiderman's Office for fraud.

Schneiderman announced the investigation a day after a New York County Supreme Court Justice ordered the developers behind a luxury condominium development at 15 Broad St. — Jeshayahu "Shaya" Boymelgreen and an Israeli company, Africa Israel Investments Ltd. —to turn over control of the building to tenants, set aside money to finish the project and stop selling securities in New York State.

The developers — who got at least $360 million for the condo sales — allegedly drained funds from an escrow account that was supposed to help finish the project, according to allegations the AG's Office made in court filings. As a result, the developers have failed to get a Permanent Certificate of Occupancy for the building, which could make it hard for owners of the 400-condos in the development to refinance their mortgages or sell.

"We believe the evidence we have found to date is a fraud on homeowners and, by the way, conducted literally on Wall Street," said Karla Sanchez, Executive Deputy Attorney General for Economic Justice.

In addition to the condos, the development includes retail space and 23 Wall St., the former home of JP Morgan Co. and a historic landmark.

The AG's announcement comes about three years after condo owners sued the developers alleging shoddy work. Among the complaints were unfinished amenities such as a theater and business center.

"The problems surfaced pretty early on," said Linda Gerstman, a resident at the development. "Pipes were bursting. They installed the wrong pressure reducing valves on certain floors so people's toilets were exploding." 

Attorney Steven Sladkus is representing the condo owners at 15 Broad St. He says the developers have had similar issues at other projects.

"These particular defendants, in my humble opinion, have left a terrible trail of construction defects," said Sladkus, who is also representing owners at the Beacon Tower development in Brooklyn.

Sladkus called the court order "like manna from heaven."

An attorney for Boymelgreen and Africa Israel did not return calls for comment.

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