AG Schneiderman Announces Permanent Ban On NYC Attorney from Securities Work for Allegedly Facilitating Fraud In Condo Sales
By Long Island News & PRs Published: April 23 2014
Schneiderman: Attorneys Who Commit Fraud Will Be Held Accountable
New York, NY - April 23, 2014 - Attorney General Eric T. Schneiderman today announced a settlement with Brooklyn attorney Harold L. Gruber, Esq., and his law firm, Harold L. Gruber, P.C., for allegedly submitting at least nine fraudulent filings to the Attorney General’s Real Estate Finance Bureau and breaching his fiduciary duties as an escrow agent. Under the settlement agreement, Gruber and his firm are permanently barred from engaging in any act, directly or indirectly, related to the offer or sale of securities in or from New York, which includes cooperative apartments and condominium units.
“There’s no place in New York for attorneys who commit fraud,” Attorney General Schneiderman said. “It’s our job to protect homebuyers, and that means stopping real estate developers – and anyone else – from committing fraud while taking part in real estate transactions.”
Attorney Harold L. Gruber, 60, is a solo practitioner with an office in Brooklyn. He was one of the most prolific filers of offering documents with the Attorney General’s Real Estate Finance Bureau. Under the terms of the settlement, Gruber is permanently barred from filing any documents with the bureau on behalf of property developers, or engaging in any other securities-related activities. Mr. Gruber has agreed to pay $60,000 in fines. A court’s order, in effect since December, preliminarily enjoining Gruber from engaging in fraud or in securities-related activities also will remain in effect permanently under the settlement.
The Attorney General’s investigation into Gruber began after homebuyers at the Mirada, a newly constructed condominium located at 161 East 110th Street in Manhattan, complained to the office about pervasive water leaks and construction defects in their brand-new building, and that the developers failed to obtain a permanent certificate of occupancy from New York City’s Department of Buildings.
Under New York law, a seller of condominiums must file a written document known as an offering plan with the Real Estate Finance Bureau prior to engaging in any public marketing or sales activity. The plan must contain all information material to the offer, including representations about the individuals making or taking part in the offering and the condition of the property being offered. The Martin Act empowers the Attorney General to investigate and bring civil claims for fraud in real estate securities sales, for injunctive relief, restitution and disgorgement.
In addition to the allegations of construction defects, the Attorney General found that Gruber, on behalf of his real estate developer clients, had allegedly illegally notarized documents for submission to the bureau in connection with the required offering plan. Gruber also allegedly released all the purchasers’ down payments from an escrow account to his developer clients, Joseph Scarpinito and Shiraz Sanjana, in violation of his fiduciary duties to the purchasers and in violation of the Martin Act.
In December, the Attorney General’s office obtained a temporary court order barring Gruber, Scarpinito and Sanjana from selling securities while the investigation into the development and sale of residential condominium units at the Mirada continued.
In February, Scarpinito and Sanjana, and the entities under their control, 110th Street Development LLC and the John Scarpinito Trust, deposited $200,000 with the Attorney General’s Office pending final resolution of the ongoing investigation. The money remains with the Attorney General’s Office until the investigation is complete.
As a result of the investigation, the Mirada now has a permanent certificate of occupancy, issued on March 24, 2014. Owners of units in the Mirada are now free to sell, refinance and fully utilize their units.
Further background on the case can be found here.
The investigation is being handled by Assistant Attorney General Serwat Farooq, Deputy Chief Andrew H. Meier, Special Counsel Jeffrey R. Rendin 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.
A copy of the settlement agreement can be viewed here.