If any co-op deserves to be called the Lazarus of New York City, it is surely Big Six Towers in Woodside, Queens.
Like the biblical figure who was raised miraculously from the dead, this 982-unit, city-controlled Mitchell-Lama co-op has returned from a grave dug by every co-op board’s worst nightmare – a corrupt manager who bilked the co-op of more than $10 million.
Today, almost as miraculously as Lazarus, Big Six is not only alive and well, it is actually looking at a bright, financially solvent, and, best of all, corruption-free future.
To understand just how remarkable this is, you must first understand just how bad things were in the bad old days. Big Six’s seven buildings, spread across 12 acres near New Calvary Cemetery, were erected in 1963 with a long-term, low-interest, city-held mortgage. The complex, known as “the jewel of Woodside,” was built to provide housing for members of the Local Six Typographers Union and other moderate- and middle-income New Yorkers. Hence, the name Big Six.
In 1967, the co-op added a 70,000-square-foot on-site shopping mall as a way of generating revenue and providing goods and services for residents. Two years later, it made the fateful decision to hire a manager named Richard Stone.
At first, Stone seemed to be doing a good job. He oversaw construction of a power plant that has saved the co-op a small fortune over the years. He kept monthly maintenance payments low. His reputation within the co-op industry was so lustrous that he was named president of the New York Association of Realty Managers.
In the late 1980s, Stone suggested adding a second story to the shopping mall. He said the expansion would generate an additional $1 million in revenue for the co-op every year.
It sounded like a good idea at the time.-- It was also a bit unorthodox. Stone secured $10 million in construction loans from the National Cooperative Bank (NCB). Instead of paying outside contractors to do the work, he urged the board to save money by employing construction companies he had formed with several partners. But, as subsequent lawsuits and audits showed, Stone and his partners used materials, supplies, and labor purchased with Big Six money to do work at three other residential complexes.
When the $10 million ran dry, Stone siphoned off the co-op’s funds earmarked for water and sewer bills and real estate taxes. Stone also obtained $2.3 million in the form of debenture bonds from 300 Big Six residents.
When he went back to NCB for yet another loan, alarm bells finally started ringing. As the cost of the still-unfinished shopping mall spiraled to $16 million in 1994, the New York Department of Housing Preservation and Development (HPD), which oversees the operation of all city-subsidized Mitchell-Lama properties, ordered an audit.
The audit unearthed a long list of questionable practices, among them, Stone providing himself and his partners with cars, car phones, and expense reimbursements that were, in essence, tax-free salary bonuses.
In the fall of 1994, Big Six’s board hired the accountant Carole Newman to audit the co-op’s finances. She was hampered by incomplete, shoddy, and sometimes nonexistent records. Small wonder. Stone had five shredding machines in his office, and he kept them busy.
“He was very suave,” Newman says. “But when we got into the books and records, it was obvious he was using the shopping center employees to do work at other businesses he had set up. This is definitely one of the most amazing things I’ve seen in my 20 years as a CPA.”
The board fired Stone, and a flurry of civil lawsuits were filed. Stone was eventually ordered to repay the co-op $2 million, but he never paid a cent because he was “destitute,” according to Jonathan Young, the attorney who filed the suits on behalf of the cooperative. No criminal charges were ever filed.
“I was disappointed he and the board’s lawyer and accountant weren’t brought to trial,” Young adds.
“Stone didn’t actually steal. He really had not committed a crime,” says Diana Cort, 72, a psychotherapist who is now assistant treasurer of the Big Six board. “And we could not prove that the board was faultless. It was all very convoluted.”
The psychotherapist theorizes that Stone was driven not by a lust for money but by a taste for the petty perks of power – the car, the car phone, the private parking space, and the sense of being a player in a game of his own devising. There was also speculation that he had gambling debts.
Cort, as it turned out, was one of the first people to sense that Stone was up to no good. When she was first elected to the board in 1990, she and a few other concerned board members started asking questions. Why wasn’t the shopping mall finished? Where was all the money going? Where were the records?
“Richard Stone stonewalled us,” says Cort, who moved into Big Six in 1964. “I realized we were not getting a full accounting. When I would ask for it, [board president] Roland Solomon and [board member] Paul Goldstein would tell me to shut up and sit down.”
It is now widely agreed that a toxic mix of collusion, apathy, and simple ignorance on the part of the board opened the door to Stone’s schemes. And therein lies an invaluable lesson for every co-op.
“I place some of the blame on the board that was there at the time,” says the current treasurer, Jerry LoMonte, 67, a retired IBM manager who moved into Big Six when it first opened in 1963. “They had a responsibility to watch that kind of stuff. They were sleeping.”
Adds Cort: “It’s the board’s responsibility to deal with the finances. If you don’t understand it, you shouldn’t be there. If you find it dull and boring, you shouldn’t be there. It’s a lot more work, and it takes a lot more time than you expected. It’s kind of like a marriage that way.”
“The lesson learned,” LoMonte notes, “is that if you don’t have control, you open yourself up to unscrupulous people – and also to people who make honest mistakes. Be sure you’re watching what’s going on. You don’t want to micromanage, but you must have constant oversight. No bills get paid now unless the president or treasurer signs off on them.”
The key to Big Six’s salvation was a series of increases in the monthly maintenance and, in 1998, a $21 million loan from the Community Preservation Corporation. The loan paid off the shopping mall mortgage, unpaid bills, interest, fines, and legal fees. The co-op still owes $10 million on its original HPD mortgage.
But the co-op is back from the grave and no longer hemorrhaging money. There’s now a $780,000 capital reserve, and major capital improvements are in the works – installing security cameras, repaving parking lots, relining water heaters, and replacing all windows – at a cost of nearly $5 million.
Even with the increases in the monthly maintenance, LoMonte notes with pride, Big Six is still below the market rate for Queens. The co-op’s monthly maintenance ranges from $380 to $990, depending on the size of the apartment. Shareholders can buy in for $17,000 to $44,000.
“We’re in great shape now,” LoMonte says. “The board and management are working toward fixing physical things that enhance the property and make it beautiful. Our accountants tell us we’re in the best shape we’ve been in for a long while.”
Meanwhile, the completed shopping mall is doing brisk business, just as Richard Stone predicted it would.Stone’s whereabouts are not known.