A.G. Schneiderman Announces Court Order Barring Property Developers Africa Israel And Shaya Boymelgreen From Securities Sales Pending Fraud Investigation

Last week, Attorney General Eric T. Schneiderman announced a court order that bars Africa Israel Investments Limited, certain of its affiliates and condo developer Jeshayahu “Shaya” Boymelgreen from offering securities, including condos and coops, in New York pending a fraud investigation. The Attorney General’s Real Estate Finance Bureau is investigating allegations of fraud in the offering of condo units at the Downtown Condominium, a Wall Street development, related to the disposition of escrow funds, the developers’ obligation to complete construction and their refusal to relinquish control of the property to its rightful owners, those who bought and reside in the units.

“This fraud on homebuyers, conducted literally on Wall Street, is emblematic of the very worst conduct by property developers,” Attorney General Schneiderman said. “Homebuyers at the Downtown Condominium were deprived of the most fundamental aspects of homeownership - a completed home and control of their property.”

The developers were ordered by a Manhattan State Supreme Court Justice Thursday to deposit $470,000, monies which should have been held in escrow, into a court supervised account. The developers had represented to purchasers that these funds were being held in escrow to secure the completion of the Downtown Condominium development when they were not.

The order further requires Africa Israel, a publicly-traded Israeli conglomerate, to relinquish control of the residential condo board of the Downtown Condominium, a 400-unit condominium located at 15 Broad Street on the corner of Wall Street in Manhattan, to the unit owners. The Downtown Condominium sits directly across the street from the New York Stock Exchange, and a portion of it was originally built by J.P. Morgan in 1913. It is listed on the National Register of Historic Places and is designated as a landmark by New York City.

Africa Israel and Boymelgreen sold the landmarked portion of the condo to CS Wall Street LLC, a shell entity that has left the landmark unit vacant. That portion is believed to be wholly-owned and controlled by China Sonangol, a joint venture between Hong Kong based China International Fund and Angola’s state-owned oil company Sonangol. Africa Israel, in partnership with Boymelgreen, undertook renovation of the Downtown Condominium in 2002, sold all the units in a public offering that grossed them at least $360 million, and subsequently abandoned efforts to complete the renovation of the property, the residential units and the commercial space. They have left the development unfinished and failed to procure the legally-required permanent certificate of occupancy for unit owners. Africa Israel has retained control of the residential condo board even though it has not owned any portion of the property for nearly five years.

Issued pursuant to General Business Law section 354, a provision of New York’s Martin Act that confers powers on the Attorney General to investigate and halt fraud, the court order compels Boymelgreen to testify before the court about the development and sale of units at the Downtown Condominium. Africa Israel, Boymelgreen, and entities controlled by them, all of which have defied subpoenas demanding documents related to their fraud, now must produce evidence that they have willfully concealed from the Attorney General.

Other respondents named in today’s court order are 15 Broad Street, LLC, the entity that developed the Downtown Condominium, Pinchas Cohen, the former CEO of Africa Israel, 15 Broad Street Managers, LLC, AI Properties and Developments (USA) Corp., AI Holdings (USA) Corp., Boymelgreen Family LLC.

The investigation is being conducted by Assistant Attorney General Elissa Rossi, Special Counsel Jeffrey R. Rendin, Deputy Chief Andrew H. Meier, and Bureau Chief Erica F. Buckley, all of the Real Estate Finance Bureau as well as Executive Deputy Attorney General for Economic Justice Karla G. Sanchez.