A.G. Schneiderman Announces Court Order Barring NYC Attorney And Condo Developers From Securities Work Pending Fraud Investigation
Court Enjoins Harold L. Gruber And Developers Joseph Scarpinito And Shiraz Sanjana From Conducting Business Related To Condos Or Securities During A.G. Investigation; Orders $3.2 Million Of Harlem Homebuyers’ Deposits Be Held By The Court
Schneiderman: Developers Who Commit Fraud And Attorneys Who Facilitate Fraud Will Be Held Accountable
NEW YORK - Attorney General Eric T. Schneiderman today announced he obtained a court order that bars Brooklyn attorney Harold L. Gruber and his condominium-developer clients, Joseph Scarpinito, who has a prior federal felony conviction for bank fraud, and Shiraz Sanjana from doing condo and securities-related work in New York pending the court case. The order enjoins the respondents from engaging in any act directly or indirectly relating to the offer or sale of securities (which includes coops and condos) in or from the State of New York.
The order, requested by Attorney General Schneiderman’s Real Estate Finance Bureau and signed by a Manhattan Supreme Court Justice, further requires the respondents to deposit $3.2 million with the Court, the amount of money meant to secure the developers’ obligations to 67 homebuyers at 161 East 110th Street, an eight-story development known as the Mirada.
“Because of their egregious conduct and their failure to cooperate, my office sought a court order under the Martin Act that stops these actors from operating in the securities markets and safeguards the purchasing public and the victims at the Mirada as we continue to investigate,” Attorney General Schneiderman said. "My office is here to protect condominium and co-op buyers from fraud and it remains our priority to prosecute unscrupulous lawyers and developers who undermine the public trust with false filings.”
Pursuant to his authority under the Martin Act and after receiving complaints from homeowners, Attorney General Schneiderman launched an investigation into Joseph Scarpinito’s and Shiraz Sanjana’s development and sale of residential condo units at the Mirada, a newly-constructed condominium located at 161 East 110th Street in Manhattan. Homebuyers at the Mirada complained to the Attorney General’s 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 the City’s Department of Buildings.
In the course of the investigation, it became clear that Scarpinito and Sanjana have participated in an elaborate ruse intended to defraud homebuyers – a ruse that was facilitated by their lawyer, Gruber. Scarpinito, Sanjana and Gruber submitted at least nine false filings to the Real Estate Finance Bureau in their attempt to skirt their obligations to deliver completed apartments to homebuyers and conceal the developers’ identities. They concealed their identities to avoid disclosing Scarpinito’s fraud conviction, as is required by law. The fraud was also an attempt to walk away with $3.2 million of purchasers’ deposit monies, and pin all liability on Scarpinito’s 83 year-old mother, Nancy Scarpinito, who was listed as the sole individual controlling the developer of the Mirada in filings with the bureau. It is not believed at this time that Nancy Scarpinito had any complicity in the conduct of her son, Sanjana, or Gruber.
When confronted with the statements of several witnesses – including those of Gruber’s current and former employees and Scarpinito’s own mother – as well as substantial documentary evidence of their fraud, both Gruber and Scarpinito failed to make restitution to their victims or cease their fraudulent practices. Indeed, Scarpinito defied a subpoena seeking information about the fraudulent activity.
The judge signed an order pursuant to General Business Law section 354 on Wednesday. The order requires the parties to deposit the $3.2 million of wrongly-released deposit monies with the court; orders Harold L. Gruber, P.C., 110th Street Development LLC and The John Scarpinito Trust to produce documents related to the sales activity at the Mirada; and requires Joseph Scarpinito and Shiraz Sanjana to testify in open court about their condo development and sales at the Mirada.
Joseph Scarpinito, 59, has a history of business failure, bankruptcy and criminal conduct, including a 1998 conviction for felony bank fraud in the U.S. District Court for the District of New Jersey that he concealed from Mirada homebuyers. Shiraz Sanjana, 54, has been Scarpinito’s business partner for years, and appears to have been involved in the fraudulent conduct at the Mirada. Attorney Harold L. Gruber, 60, is well-known to Brooklyn condo developers as a solo-practitioner with an office in Brooklyn. Other respondents named in the order are The John Scarpinito Trust, which is controlled by Joseph Scarpinito, and the 110th Street Development LLC, the entity that developed the Mirada, also controlled by Scarpinito.
Senior Investigator Richard D. Friedman aided in the investigation.
The investigation is being conducted by Assistant Attorney General Serwat Farooq and Jeffrey R. Rendin, Chief of Real Estate Finance Enforcement, under the auspices of Erica F. Buckley, Chief of the Real Estate Finance Bureau and Executive Deputy Attorney General for Economic Justice Karla G. Sanchez.
A copy of the court order can be viewed here.