Daily News -- April 28, 2002

Housing Authority
Co-op elections give owners a chance to keep management tidy

By BILL MORRIS

een from the street, the two co-op buildings appear to have little in common. The Normandy roosts above the Hudson River on Manhattan's fashionable upper West Side. Contello Towers 2 sits in the blue-collar bastion of Bensonhurst, Brooklyn.

But they are linked by an ugly little word that terrifies the 500,000 New Yorkers who live in cooperative or condominium apartments.

That ugly little word is fraud.

At the Normandy, an investigation by diligent shareholders revealed last year that the building's long-time managing agent, Peter Cosme, had been using the residents' money to pay for his personal car loans, lawyers' fees, wedding expenses, computer equipment and office supplies. The agent, who has since resigned, skimmed more than $500,000. The co-op's board began legal proceedings against him last May.

In Brooklyn, Contello Towers 2 was run with an iron fist by the chairman of its maintenance committee, Vincent Toressi. Last summer, after awarding a $2 million capital improvement contract that was not the lowest bid, Toressi was indicted for arranging a 10% kickback from the construction company. He is no longer on the board.

The people who sit on co-op and condo boards can determine whether a building becomes a peaceful, financially solvent refuge — or turns into another Normandy or Contello Towers 2. And with most co-ops and condos holding annual meetings between now and the end of May, this is the season when apartment owners have a unique opportunity to control their destiny, by deciding who will sit on their building's board for the next 12 months.

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	Carol Ott

"This is a big time of year," says Carol Ott, publisher and editor in chief at Habitat magazine, which for the last 20 years has tried to get the most qualified, committed and, above all, honest, people on the city's 10,000 co-op and condo boards.

"You'll have the annual meeting. The board will give you a financial statement, they'll explain what they've done for the past year. It's a huge thing if your maintenance is going to increase. It's the one time of the year when you get to hear all these things."

It's also the time to make changes — which is not always easy to do.

"Once you're in it's hard to get off the board," Ott says. "Maybe that's due to apathy. Maybe it's because you do a good job. If you're doing a good job, people don't want to get rid of you. And some people don't want to leave."

But staying too long can expose board members to dangerous temptations, Ott says, which is precisely what happened at the Normandy and Contello Towers 2.

"After about three years you've built a power structure," Ott says. "With that come all the risks and liabilities. It's easy for people to approach you in a corrupt way. The danger is in holding power for a long time. You control the purse. Without a lot of checks and balances, this person could take a wrong turn and become corrupt."

Unfortunately, the fraudulent practices at the Normandy and Contello Towers 2 were hardly isolated incidents. In 1999, an investigation of co-ops and condos by the Manhattan district attorney resulted in the indictment of more than 80 companies and agents for colluding in millions of dollars worth of kickbacks, bid rigging and other illegal practices all across the city.

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The responsibilities of co-op and condo boards can seem intimidating, and the headaches can get downright staggering.

One former co-op board president summed up the unpaid job this way: "You're just a super — with no power."

But boards do have power. They set policies for everything from owning pets to performing alterations, selling and subletting apartments, even using the elevators. They must make sure all environmental and safety regulations are followed and that the building's exterior is inspected every five years by an architect or engineer.

Some boards oversee the day-to-day operation of the building, such as awarding repair and improvement contracts, paying bills, hiring a super. Other boards, particularly in larger buildings, hire a management firm to handle these chores.

Interviewing potential management reps can get tricky. One candidate might be perfectly reputable while the next one, in the words of a 1996 Habitat article, "can be as slick as an Exxon oil spill — and disappear much more quickly after he gets the job." The key, say experts, is to prepare a list of questions and ask them of every potential managing agent. (See related story.)

But perhaps no function of a co-op board is trickier — or more loaded with legal land mines — than interviewing prospective residents, both buyers and subletters.

Gone are the days when boards had great leeway to reject potential buyers — as a Park Ave. co-op board did when former President Richard Nixon applied to their building. Fearing headaches from publicity and paparazzi, the board turned Nixon down. Miffed, he went to New Jersey to live out his last days.

In today's litigious climate, the board that rebuffed Nixon almost certainly would have wound up in court.

New York City now has laws against housing discrimination based on race, age, gender, national origin, sexual orientation, religion and occupation. If an applicant is able to afford an apartment, there is little a board can do to keep him out of the building. Not surprisingly, the fear of getting sued weighs heavily on many board members.

The mere mention of "the Biondi case" still sends shivers through boards all over the city, five years after it made headlines.

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It refers to Nick Biondi, who was board president of Beekman Hill House on E. 51st St., a 66-unit building that went co-op in 1986. By most accounts, Biondi was a dream board president — aggressive, honest, hardworking and hands-on, though, in the words of one former board member, he could be a bit of a "bulldog" at times.

Nick Biondi

Biondi's troubles began in 1995, when an inter-racial couple — Gregory Broome, who is black, and his wife, Shannon, who is white — applied for a two-year sublet in Beekman Hill House. Biondi and another board member customarily interviewed such prospective tenants, though Broome, who had recently moved from Maryland to Manhattan to take a job with a prestigious law firm, claimed he was unaware that board approval was required for the sublet.

That small misunderstanding led to larger difficulties. When Broome showed up at the interview without his wife, Biondi said he wanted to meet her before approving the couple's application. Soon, board members were receiving phone calls from the owner of the apartment, who was upset with the delay, and charges of racism started flying.

Angered, the full board decided to meet first with the apartment owner, then with the Broomes. With talk of a possible discrimination suit suddenly in the air, the meetings were described as "tense."

After discussing the issue with their attorney, who advised that they would be setting a dangerous precedent if they succumbed to the threat of a discrimination suit, the board voted unanimously to reject the Broomes' application. The Broomes promptly sued the board for racial discrimination. Heeding the advice of their attorney and insurance company, the board decided to go to trial rather than settle out of court.

In May 1997, a federal judge ruled in favor of the Broomes, awarding them a stunning total of $640,000 in damages.

Nick Biondi was personally liable for $125,000 of that sum. He sued to have the co-op cover his share of the judgment, but lost.

Eventually, Biondi had to sell his apartment in Beekman Hill House — his home for 18 years — to cover his $200,000 in legal costs. He has since left the city and now works as an insurance broker on Long Island. He's suing the board's lawyers for malpractice.

Is he bitter about the experience?

"I'm disillusioned and dismayed with the system," says Biondi, who has always insisted he is not a racist. "I learned that these discrimination suits are a form of racketeering."

In Carol Ott's view, Biondi's nightmare teaches a valuable lesson for all co-op boards: The best way to avoid devastating litigation is to get good legal advice.

"There are about 40 law firms in New York City that have significant practice in co-op law," Ott says. "Just because a lawyer handles closings, that doesn't make him qualified to advise a co-op board. You want a firm that has experience in advising co-op boards."

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Not all board presidents have experiences as nightmarish as Nick Biondi's.

Mozelle Butts, treasurer of the Merrick Park Gardens co-op in Jamaica, Queens, has been a member of the board for 25 years, including a 15-year stint as president. Overall, she says, the experience has been positive.

"I get satisfaction because I see the accomplishments," says Butts, 79, a retired secretary who moved into Merrick Park Gardens when it was built in 1952.

"All our mortgages are paid off. The grounds are very well kept. The corporation wouldn't succeed if the people didn't love this place."

In her half-century of co-op living, Butts has seen sweeping changes, especially in the discrimination laws that brought on Nick Biondi's legal woes.

"We screen applicants very, very carefully," Butts says. "We try to look at a lot of things, like character. But the laws are so rigid now you can't ask questions about lifestyle or age. You can ask them where they work but not what they do there. I used to be able to ask all sorts of questions, but you can't do that today."

She doesn't expect the Merrick Park Gardens annual meeting in May to be a raucous affair, as it is in some of the city's co-ops and condos.

"Our people are not unhappy," Butts says. "They realize they've got a good deal."

And with more than half a million New Yorkers living in co-op and condo apartments, it's safe to say they're not alone.

Before You Vote

Carol Ott, publisher and editor in chief of Habitat magazine, concedes that it is probably impossible to develop a fail-safe system for getting qualified and honest people on co-op and condo boards. But here are a few simple questions shareholders should ask their board members:

• Is the board getting at least three bids for major capital improvements?
• How many signatures are on checks issued by our corporation? And what is the amount that requires more than one signature?
• Are proper minutes of board meetings recorded?
• How many people review the monthly financial statements?
• Does the board review bills when checks are issued?

Before You Hire

Here are six questions boards should ask before hiring a management firm:

• What is the firm's financial condition? (Check its bank affiliation and ability to obtain loans.)
• How knowledgeable is your rep? (Look closely at his education, experience and knowledge of the building's infrastructure.)
• How much is your rep paid? (A higher salary usually means a higher level of expertise.)
• How many buildings does your rep manage? (Many experts say that managing four midsize buildings is plenty for one person, though this may vary depending on the level of support from his home office.)
• What kind of financial reports will you get? (You should get a statement by the 10th of every month, with a summary of all activities, including arrears, checks and copies of all paid bills.)
• How much does the management firm charge and what do you get for your money? (Get promises in writing.)

Original Publication Date: 4/28/02  http://www.nydailynews.com/2002-04-28/New_York_Now/Cityscape/a-148960.asp