Bankrupt Promises?

Janek and Sal Babek immigrated from an upheavaled Russia to Queens in 1991 on the slimmest of means: a combined $180 and only enough English to say their names. But despite lean pockets and the difficulty of learning a new language, they found work and a place to live. She took cleaning jobs, and he drove a cab.
More than 10 years have past since those hardscrabbled beginnings. Since that time, they have purchased a three-bedroom apartment at the Anita Terrace co-op in Rego Park for $72,000 and added $40,000 to renovate the interior.
But they, like their fellow shareholders at the 559-apartment complex, most of whom are middle-class immigrants with similar stories, are at risk of losing everything they have invested to bankruptcy.
Since the mid-1990s, shareholders at Anita Terrace have fought tooth and nail with the co-ops sponsor, Visutton Associates, over, they say, its mismanagement, mortgage improprieties and buildings hazardous conditions. When the sponsor raised maintenance fees by 5% in 1995, Abram Gin, a Ukranian immigrant whose son owns an apartment at the co-op, tapped into the shareholders ire and rallied them against Visutton.
Under his leadership, the shareholders accused the sponsor of adding $4 million of personal debt to Anita Terraces already unbearable mortgage of $15 million, and of misleading buyers with advertisements for luxury apartments while a broken water tower, drafty windows, a dilapidated parking garage and corroded pipes that led to a sewage plume under the ground floor went unfixed. Despite court challenges by the sponsor, the shareholders, under the tenets of the offering plan, replaced Visutton as management with their own board of directors and Gin as an advisor, in 1999.
After taking over, the board and Gin continued to press the sponsor and its bank, RB Assets, for back maintenance fees to repair the parking garage condemned by the Department of Buildings (DOB) in February 1999 a mold problem and piping that had exhausted its life expectancy.
Howard Schwartz, a board member, said independent studies by engineering companies showed that $12 to $13 million were needed for the repairs. It was money they did not have, since the boards emergency capital funds were little more than $1 million, he said. Attempts to settle the dispute, including one mediation between Judge Milton Mullen, collapsed. And in 2001, facing more than $1 million in property taxes to the city as well as water and sewer taxes, Gin and the board filed for Chapter 11 bankruptcy to have their case heard before a judge. There they appointed Zachary Kass as a trustee, and for the past two-and-a-half years, their case has idled awaiting a decision or proposal.
The troubled co-ops story gets more convoluted.
"I didnt realize down the road it would be Chapter 11," said Janek Babek wanly. "They give us the maintenance [fee], and we always pay. We never steal anything from the building. How come we are the ones who are going to lose all the investments."
She and her husband say they regret placing their hopes with Gin a former Bronx developer with a $350 million empire in the late 1980s which went bankrupt and, although investigated for improprieties, was never charged with a crime. The Babeks and other shareholders believe Gin, who has been championed in previous articles as a hero and crusader, intentionally led them to Chapter 11 to depreciate the co-ops value so he could purchase the building at a bargain rate if the shares are liquidated. Recently, 200 shareholders, about 30% of the co-ops homeowners, signed a petition to change the board of directors and remove Gin from an advisory role.
"When we start, we were far away from Chapter 11," said Boris Pushkanzer, a shareholder at Anita Terrace, adding that Gin and the board exacerbated the co-ops solvency problem.
Giving one example, petition signers said Gin and the board made the situation worse by reducing maintenance fees 8% while hiring a security force for $300,000. They also complain that lawyers were paid in advance for their services prior to declaring bankruptcy. They also question why there was no attempt to fix the condemned garage and why shareholders continued to pay a maintenance fee for it each month.
"Dont you first try to fix it and then present the bill, sue and then collect?" asked shareholder Albert Tamayev.
Petition signers are also miffed that, though the trustee is now in charge of the co-ops finances, Abram Gin still has an office in the co-op rent free.
Gin and board member Howard Schwartz, categorically deny all of the shareholders accusations and downplayed the petition as frustration over the bankruptcy courts exorbitant assessment fees on the shareholders, which in total amount to $220,000 a month. Schwartz said that making the repairs to the garage and then suing the sponsor and the bank for the bill would have been impossible because the costs were too high. And, he said, maintenance fees continued on the garage because they were required by law. He also justified Gins office, saying it serves as space for the board.
"I spoke to a lot of shareholders that regretted signing it," said Schwartz about the petition, adding that many felt misled by its organizers. He said it was not the true sentiment of the majority of shareholders. While stressing he did not want to splinter the unity of the shareholders, he pointed out that some of the petition organizers had personal vendettas with Gin.
But Babek and approximately 25 others who met with The Queens Courier say the petition is legit. They have brought the petition to the attention of the trustee, but he has done nothing, they say. Despite phoning Kass repeatedly, he did not return calls before press time.Shareholders also say Kass has refused to go to landlord-tenant court to remove Gin from his office.
"He does not want to upset Mr. Gin because he can collect the assessment," said Tamayev. "The assessment keeps the bank in line and keeps the co-op from Chapter 7 [liquidation]."
The co-ops next court date is February 18.