5 board members of Brooklyn charities sued for wrongful real estate sale, misappropriation of funds

Accused of Wanting to Take Advantage of Brooklyn’s ‘Lucrative Real-Estate Market’

April 14, 2015 By Charisma L. Troiano, Esq. Brooklyn Daily Eagle

Brooklyn Judge Genine Edwards ordered a temporary freeze on the bank accounts and assets of two charities. Eagle photo by Rob Abruzzese

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An attempted sale of two Brooklyn townhouses may have constituted an illegal real estate transaction. The New York state attorney general has filed a lawsuit against directors of two Brooklyn-based charitable organizations for alleged gross negligence and failed management of the organizations. A Brooklyn judge has granted a temporary restraining order to freeze the organizations’ assets.

Brooklyn Child and Family Services Inc. and Project Teen Aid Housing Development Fund Corp. operate two converted townhouses in Bedford-Stuyvesant. It is alleged that board members attempted to sell two converted Brooklyn apartments on the private market with the hopes of thousands of dollars. The homes, The Rose F Kennedy Family Center and the Rosa Parks Apartments, have been under the auspices of the nonprofits since the 1990s and were created as transitional residences for homeless, pregnant and parenting young women and their children.

But according to Attorney General Eric T. Schneiderman, members of the board went afoul of the charities’ mission and attempted to use the organizations as a conduit for personal financial gain.

In a lawsuit filed last week Monday, the AG’s Office alleged that members, including the organization’s financial manager, listed the two townhouses with a price tag of $2.1 million and $3.6 million without prior approval.

Prior to a charity’s sale of key assets, the organization must first obtain approval from either a court or the AG’s Charities Bureau. In the case of the two Brooklyn properties — located at 243 Hancock St. and 178 Halsey St. — the AG contends prior approval was neither sought nor obtained.

“Lured by a lucrative real-estate market in Brooklyn, the board members of these two charitable organizations allegedly attempted to illegally sell two brownstones that belonged to the charities and were meant to serve as housing for single mothers — kicking out their vulnerable residents along the way,” Schneiderman said in a released statement.

Schneiderman’s Charities Bureau began investigating the organizations and their members after the two buildings were listed by real estate brokerage firm Halstead in 2014. Prior to listing that the property was for sale, the organizations’ boards, in August 2013, allegedly directed the eviction of the women who resided at the Rose Kennedy Center and the Rosa Parks Apartments. The purpose of the eviction, the AG’s court petition asserts, was to profit personally by listing the buildings in a private sale.

After receiving complaints from New York City Department of Housing Preservation (HPD), the AG’s Office says it worked with Halstead in February 2015 to remove the listings of the two properties and put a stop to the organizations’ attempt to sell the buildings.

“I am grateful that through the diligence and initiative of HPD Assistant Commissioner Allred and his team in the Office of Asset Management and Property Management, this wrongdoing was brought to light,” said HPD Commissioner Vicki Been.

The AG’s Office says it is continuing its investigation. Other alleged improprieties by the organizations’ board and its officers include taking $80,000 from a charitable bank account directly into the personal account of financial manager Gene Baynes; taking out two high-fee loans totaling $600,000, secured by the Rose Kennedy Center’s property on Halsey Street, which currently has an annual interest rate of 12 percent and a default rate of 24 percent;forging the signature of the secretary of the board to authorize the high-fee loan on Rose Kennedy Center’s property, without the board member’s permission; failing to pay the wages of their employees and neglecting corporate filings, including tax returns.

The board members are expected in Brooklyn Supreme Court on April 22.