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President’s Report
a cursory review of Riverbay’s financial statements made it quite clear that Co-op City was in trouble. As a former internal auditor and director of accounting, I started to get the feeling that something was wrong here and Co-op City was headed full speed into deep financial and capital structure problems. It was at that time that I decided to volunteer the next five years of my life to help turn things around in our community, and we were able to address: • The bolstering of contract amounts in the Restoration Department so that greater quantities of materials and supplies (than necessary) would be ordered and then not used in Co-op City, but disappear. • The steering of large flooring and tile contracts to little obscure companies that had nonexistent addresses. • Marion Scott Real Estate, Inc.’s (MSI) principal attempting to steer Co-op City’s $400 million loan to the company where his son worked, Lehman Bros. Please note, Lehman Brothers was one of the companies that was responsible for the collapse of the financial markets in 2007 through the use of credit default swaps. Lehman went bankrupt in 2008; imagine if Riverbay had followed MSI. • The rigging of Riverbay’s computer system by MSI to generate higher payments to a contractor for work not done. • Board-member-selected candidates for the Co-op City Public Safety Department with low scores were allowed to jump the list in front of higher scoring candidates with MSI’s involvement. • A $565 million balloon loan that wrecked Co-op City’s finances – $78 million in interest, penalties and fees with little reduction in principle. The arrest, indictment and felony conviction of former Riverbay President Iris Herkowitz Baez on bribery and kickback charges. My only regret during the 2004-2009 tenure was that a series of Board directors were elected by the residents who apparently were not, in my opinion, savvy enough to see that a balloon loan was the wrong type of loan for a housing company with a growth rate less than the interest rate. Despite my repeated written and oral efforts, they voted for the loan. Five years later, Co-op City had to refinance at a tremendous loss because of their actions. As a result of not negotiating from a relative positon of strength prior to the financial crisis, Riverbay has fallen under the iron hand of HUD and Wells Fargo Bank for the next 32 years. Please, fellow cooperators, do not allow a managing agent and Board of Directors to ever make similar business mistakes. I left the Board in 2009 because, in my opinion, Co-op City residents reelected the same ill-prepared directors who got us into that position and the Riverbay Corporation was heading over Niagara Falls, which we did (see chart above). Second Tenure In 2014, I was once again asked to help Co-op City by the Coalition To Save Affordable Housing and Board director Cylich. I decided once again to volunteer a few more years to this community and stop a corrupt managing agent, MSI. By June of 2014, Co-op City, for all intents and purposes, was broke. There was no free operating cash; things were so bad the Director of Finance was pulling checks ($400,000-$500,000) out of the mailroom after they were signed by the treasurer. Cash on the 2014 Balance Sheet was supposed to be negative in real terms. The “new Board of Directors,” under our transparent and honest leadership, took action by: • Eliminating “No Show” jobs with raises that the managing agent had been engaged in. • Separating job titles and salaries and delegating them to the proper individuals. • Suspending a managing agent who used a Riverbay employee over multiple years to negotiate sophisticated, complex, multi-million dollar insurance policies for Rochdale Village, Queens, N.Y.; 1199 1st Avenue, N.Y.; Earl Jimerson Houses, Brook-
Co-op City Times / October 1, 2016 (Continued from page 1)
lyn, N.Y. and Harry Silver Housing Corporation. All of these NYS Mitchell-Lama and NYC HPD properties’ policies were being handled by a Riverbay employee in the Bronx while “on the clock” in the Bartow administration office for the benefit of MSI. The residents of Co-op City were paying his salary. • NYS HCR Commissioner Jamie Ruben and President Mark Colon sat by idly and did nothing to prevent any of this abuse. They did not, as far as I am concerned, have the guts to act on this state-approved managing agent on the payroll of this community’s residents. Further, in my opinion, the employees at NYS Housing and Community Renewal are probably so complacent that they do not even realize the insurance policies for Mitchell-Lama properties and structures are missing from 1986-2015.
• Violation of the Federal Labor Standards Act: Ramirez vs. Riverbay Corporation once again! The managing agent refused to pay overtime to the employees and misclassified scores of employees, classifying laborers as management staff, in order to avoid paying the taxes and proper wages. • Eliminating Co-op City “No Show” jobs that our former managing agent had been engaged in cost the residents of New York State over $500,000. • Separating job titles and salaries and delegating them to the proper individuals. • Office. • The failure of the managing agent to submit annual multi-million dollar insurance policies (17 policies) to NYS HCR. I would hope that former State Senator Ruth Hassel-Thompson and now Special Assistant to Governor Cuomo on Housing and Community Renewal would look into HCR’s failure to properly review insurance policies for all M-L properties from 1986 to the present. I doubt they are even on full file in the NYS Office. I would hope that she would read the report, exhibits, documents, allegations and recommendations made by our General Counsel’s report and report back to the governor on behalf of the thousands of residents in the State of New York regarding this managing agent being allowed to work on government property. Riverbay Corporation had to do the investigation for the NYS HCR because their legal office refused to do it themselves. We presented them two years ago with 1,000 pages of exhibits. Guess what they did? Absolutely nothing! And… According to Public Records, a federal class action suit has been filed against another NYS MitchellLama property, Rochdale Village, Queens, NY (10,000 +units). Guess who the managing agent is? None other than Marion Scott Real Estate, Inc., once again…supervised by NYS HCR Commissioner Jamie Rubin and President Mark Colon, both of whom did nothing to help the shareholders of Co-op City.