New York's Cooperative and Condominium Community

HABITAT

LEGAL/FINANCIAL

HOW LEGAL/FINANCIAL PROBLEMS ARE SOLVED BY NYC CO-OPS AND CONDOS

Latest Lessons and Repercussions of the Saparn Realty Larceny Case

Mitch Warner in Legal/Financial on April 22, 2014

Harway Terrace, 2475 W. 16th Street, Gravesend

April 22, 2014

The shivers began in January, when Gorelick, executive vice president of Saparn Realty and a member of the Real Estate Board of New York, was charged in Manhattan Supreme Court with one count of larceny and nine counts of possessing a forged instrument. He is accused of stealing more than $600,000 from the Harway Terrace Mitchell-Lama co-op at 2475 West 16th Street in Brooklyn, which his firm managed from 2001 to 2011.

Over that period, Gorelick is alleged to have funneled the money into his company's coffers "either by depositing checks from third parties written to the order of Harway Terrace or by depositing checks written against two of Harway Terrace's accounts into Saparn's business accounts," according to the criminal complaint. 

At his February 5 arraignment, Gorelick pleaded not guilty to the charges. He is also under investigation for allegedly stealing more than $2 million from dozens of other buildings.

Fannie Mae Fans

When they stopped shivering over the news concerning Gorelick's alleged theft, some boards and management companies got busy adopting the stringent guidelines of Fannie Mae. "In light of the Saparn Realty case, we have instructed our banks to send monthly statements directly to our board presidents, or treasurers, or both," says Eric McPhee, executive vice president and director of risk management at Orsid Realty. In the past, statements were sent from the bank to the management company, which passed them along to the boards. 

McPhee says it's "a given" that each building has its own bank account and records — a way to prevent the once-common practice of "commingling" the accounts of several buildings, which proved an invitation to fraud in a number of co-ops and condos.

And as of March 1, he says, Orsid is "absolutely encouraging" boards to have two members sign every check drawn on the reserve fund. He adds that his company carries more than $1 million in fidelity insurance itself, and insists that each of the 100 cooperative and condominium buildings it manages in the city carry fidelity insurance of its own.

But no matter how many safeguards are in place, board members need to remain vigilant.

Ask Questions, Don't Pass the Buck

"A board has to look at records and ask questions," says Paul Brensilber, president of Jordan Cooper & Associates, which manages 45 co-ops and condos in the city. "At some point, the board is responsible. With boards, it's always somebody else's fault. And the insurance company needs to be on its toes, too."

Every month, Brensilber says, his company gives boards a reconciled statement of every account in every building it manages. He adds, "The thing the board should think about is not how many properties their management company manages; they should worry about how the company is handling their building, how the back office operates. And you've got to use a respected accountant."

In the end, an occasional case of the shivers might be just the thing to wake up condo and co-op boards and their management companies. "There's always room for improvement," says McPhee. "This Saparn Realty case sounds like it was planned out and thought out. It appears to be a different level of sophistication, the first time we've allegedly seen bank statements falsified."

If that doesn't wake boards up, it's unlikely anything will.

 

For more, see our Site Map or join our Archive >>

Ask the Experts

learn more

Learn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments

Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise

Source Guide

see the guide

Looking for a vendor?