Who could’ve guessed it?
Disbarred attorney Michael Cohen’s former real estate partner — the same landlord who reportedly omitted rent-stabilized buildings from construction applications a decade ago — is running a business based on fraud, a new lawsuit claims.
Eric Nelson, owner-operator of city landlord Vintage Group, was sued last week by an LLC associated with real estate lawyer Herbert Chaves, who accuses Nelson of running a racketeering operation that siphoned money from his business partners, his tenants and the city for his benefit.
The suit alleges Nelson invoked a combination of illegal deregulation and fraudulent billing to swindle Chaves and his co-plaintiffs out of more than $1 million.
The underhanded deregulation went down at 330 East 63rd Street, a rent-regulated multifamily building in Lenox Hill, which Nelson and Cohen bought in 2015 and in which Chaves retained a 62 percent stake, according to the complaint.
In the years before New York’s 2019 rent law limited landlords’ abilities to drive up rents and push out regulated tenants, Nelson — who had, by then, bought out Cohen — illegally manipulated rent rolls to pave the way for vacancy decontrol, according to the suit, then convinced Chaves to fund improvements that would then allow him to hike rents.
To invoke vacancy decontrol, Nelson invented fake tenants, who he reported to Homes and Community Renewal as occupying several of the units at 330 East 63rd Street at rents much lower than the legal rate. The idea was once the “tenants,” whose concocted names included “Peter Smucker,” moved out, Nelson would be able to hike the rent.
Nelson also convinced Chaves to perform renovations to allow for higher rents on refurbished units — for example, pushing the firm to invest $59,000 to renovate an apartment, so the unit could rent for $3,000, a rate that would trigger luxury decontrol once the tenant vacated.
In reality, the suit says the renovations would only allow for a maximum rent of $2,198 a month, an amount which would not, in fact, trigger deregulation.
Still, Chaves claims he trusted the advice and completed $654,000 worth of improvements — 62 percent of which he paid for. Not only did the improvements not allow for deregulation, the complaint alleges they prevented Chaves from making the repairs necessary to actually achieve luxury decontrol before the 2019 rent laws stripped him of the opportunity entirely.
Now, the suit claims, three apartments are permanently subject to below-market rent, a development that cut the value of 330 East 63rd Street by about $430,000.
In other units, Nelson blatantly hiked rents above their regulated limit, the suit claims. The overcharges, which span 15 units, amount to just shy of $200,000.
Nelson allegedly duped Chaves into footing the bill for his personal properties’ expenses, too.
Using an American Express account in his firm’s name, Chaves claims Nelson charged expenses for 13 of his buildings and paid them out through 330 East 63rd Street’s operating account, effectively billing Chaves for the majority of the charges.
He even went as far as to give the Amex to the 63rd Street building’s superintendent to cover Home Depot runs for his other properties, according to the suit.
Nelson has withheld the majority of the Amex statements, which span 2015 to 2021. Of those he has provided, the receipts show expenses tripling from a high-side average of $114,920 spent in the years before Nelson assumed ownership to $337,343 in 2018.
Even during the pandemic when vacancies peaked, maintenance expenses for 63rd Street exceeded $291,000, the suit said.
The alleged fraud doesn’t stop there.
Other allegations detail Nelson sending Chaves invoices for painting and repairs totaling $18,000 for a company he also runs, thus, self-dealing.
The property manager also pushed the owners of 237 Henry Street and 172 Rivington Street on the Lower East Side to make renovations that the city’s department of buildings found to be illegal. Nelson concealed the DOB notices, the suit alleges, forcing the owners to incur the costs of both converting the apartments, then deconverting them to avoid fines.
And just last month, Nelson sent an email to Chaves with instructions on how to lease two stabilized apartments, an allegation the suit claims illustrates Nelson’s “ongoing disregard for legal requirements.”
“Since they are way below market, they should be rented to friends if possible,” he said.
On counts of alleged racketeering, fraud and breaches of contract, Chaves is demanding compensatory, treble and punitive damages.
Matthew Hearle, Nelson’s counsel and attorney at Goldberg Weprin Finkel Goldstein LLP, said, “The complaint appears to be littered with false allegations and meritless claims.”
Hearle said Nelson plans to provide a defense and counterclaims, “and request the court to impose sanctions on the plaintiffs for these scandalous allegations.”
The plaintiffs’ lawyer, Meir Feder of Jones Day said the firm had no comment, as the filing suit speaks for itself.
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