Late last year, after a New York Supreme Court judge ruled that billionaire Charles Cohen would need to pay up on a massive personal guarantee after a half-a-billion-dollar default, the real estate scion launched a last-ditch defense — he filed an appeal.
This week, the Appellate Division denied that action in a pivotal decision that puts Cohen on the hook for the $187 million guarantee as his real estate empire crumbles and his escape routes dwindle.
“There’s really not a heck of a lot left to do in the courts, right?” said a source familiar with the case. “There’s not a crack of daylight in that decision; it slams the door on the guarantee.”
Steven Cherniak, chief operating officer of Cohen’s Cohen Brothers Realty, said: “No judgment has been entered and the amount of the judgment has not yet been finalized.”
Fortress declined to comment.
The lender is now waiting for a lower court judge to sign and enter the $187 million judgment.
Then, it can start collecting — either cash or assets.
Cohen has already lost the properties that backed the $534 million loan. Fortress took them back in the largest UCC foreclosure ever. The lender made a $148 million credit bid for the hodgepodge of deals, which include a U.K. movie theater chain, a Design Center in Dania Beach, Florida, and a Westchester development site.
Ahead of the auction, Fortress claimed Cohen was shuffling around other assets to shield them from his lender. He put his $20 million Greenwich mansion into a trust in his wife Clo’s name, Fortress alleged, and transferred ownership of four luxury boats valued at $50 million.
Fortress will likely challenge those asset transfers as fraudulent, the source familiar said.
Meanwhile, the lender has commenced proceedings in France to enforce the judgment. Courts have already seized assets from Cohen’s “chateau,” the source said.
Cohen also owns a Saint-Tropez vineyard and is working to renovate La Pagode, a historic movie theater in Paris. He was also partnering with the French government on an office project last year.
Fortress undeniably has Cohen up against a wall. But resistance isn’t utterly futile.
Cohen could ask the Appellate Division to reconsider its decision; though the court has already written that it “considered [Cohen’s] remaining arguments and finds them unavailing.”
He could appeal to the state’s highest court; though, it’s unlikely the Court of Appeals would take the case. It typically only hears lawsuits that deal with constitutionality, big legal issues or have statewide ramifications.
Bankruptcy is always an option for borrowers facing an untenable judgment, but in Cohen’s case, it would be ill-advised. Bankruptcy typically triggers bad boy provisions, which would turn the entirety of the Fortress loan full recourse.
Cohen also could have settled. Instead, he fought.
The billionaire repeatedly refused to come to the table over the year-long battle with Fortress, insisting that the two had come to an oral agreement to extend his loan, despite Fortress’ and ultimately the courts’ claims to the contrary.
“He Thelma and Louise’d himself,” the source said.
Keith Larsen contributed reporting.
This article has been updated to include a comment from a Charles Cohen representative.