Ginsburg Development sues loan broker

By Bill Heltzel

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Ginsburg Development Cos. of Valhalla says a loan broker defrauded the company on projects in Mount Vernon and Yonkers and then used the arbitration system to disguise his schemes.

Ginsburg sued David Blatt and CapStack Partners of Lower Manhattan in August in state Supreme Court in Manhattan.

Attempts to reach Blatt and his attorney for comment were unsuccessful.

The Westchester development company, founded and headed by Martin Ginsburg, has built many residential and commercial buildings in New York and Connecticut. In 2013, the company was looking for $13 million to refinance a Best Buy store on Sanford Boulevard in Mount Vernon and $94 million to finance its River Tides luxury apartments project on Warburton Avenue in Yonkers.

Ginsburg was introduced to Blatt of Gemini Capital Markets, a commercial brokerage company operating in New York and based in Huntersville, North Carolina. Blatt, according to the lawsuit, identified himself as Gemini’s managing director and described himself as an experienced loan broker who could procure favorable financing terms. Ginsburg and Blatt entered into agreements giving Blatt rights to find financing for the projects.

Blatt found a lender for the Mount Vernon project but informed Ginsburg the company had to pay an additional $537,000 in fees. By then, the developer was in “serious need of refinancing and was in no position to cancel the agreement,” the lawsuit says.

The River Tides agreement ended after 30 days without Blatt lining up financing.

Then Blatt notified Ginsburg that he had struck a deal with William Obeid, a principal at Gemini Capital. He said Gemini was transferring its assets, including the River Tides agreement, to Blatt’s new company, CapStack.

The River Tides agreement had expired and Ginsburg had hired another broker. Several months later, Ginsburg closed on a $94 million financing deal with American International Group.

Blatt had sent a marketing package to AIG, and now he demanded a $940,000 commission from Ginsburg.

Ginsburg refused to pay. AIG had not proposed any financing through Blatt, the lawsuit says, and Blatt had no involvement in negotiating the AIG loan.

Blatt filed a petition with the American Arbitration Association claiming that Ginsburg had breached the River Tides agreement. He produced a one-page document in which Gemini assigned its rights to the River Tides agreement to CapStack, signed by Blatt on behalf of both Gemini and CapStack.

Ginsburg’s attorney tracked down Obeid, the Gemini partner who supposedly transferred Gemini assets to CapStack. Obeid, according to the lawsuit, told a different story than Blatt’s.

Blatt was terminated from Gemini in early 2014. He was never a member or owner of Gemini. He had no authority to transfer or sell Gemini assets. There never was an agreement to transfer assets to CapStack. Blatt had no authority to bring claims on behalf of Gemini, according to the lawsuit.

Blatt didn’t even have much experience as a commercial loan broker, Ginsburg’s attorney claims. He had been licensed in New York for only five months before Ginsburg hired him for the Mount Vernon project.

Blatt also had used arbitration previously, purportedly on behalf of Gemini. He claimed that Liberty Grande LLC, a Hollywood, Florida developer, owed him $400,000 in fees. He submitted an affidavit representing himself as Gemini’s managing director, the Ginsburg lawsuit says, six months after he was terminated from Gemini.

Liberty Grande challenged the arbitration petition in state Supreme Court but eventually agreed to a $100,000 settlement. Blatt executed a release on behalf of Gemini, where he no longer worked.

Ginsburg in its legal dispute with Blatt is accusing him of fraud, breach of fiduciary duty and unjust enrichment. The developer claims that Blatt used arbitration fraudulently “under the guise of being the authorized representative” of Gemini.

Arbitration is a private service that allows parties to resolve conflicts out of court and outside of public view. By using arbitration, the lawsuit says, Blatt hoped that Gemini would not discover his actions. He would have accomplished that goal had Liberty Grande not challenged the arbitration in the public courts.

Ginsburg in court papers says it has spent more than $400,000 defending itself against a fraudulent arbitration claim. It claims Blatt cost the company at least $537,000 on the Mount Vernon refinancing deal and an additional $7 million in interest on the River Tides deal.

The Yonkers project is almost done. River Tides at Greystone, a 10-story, 330-unit rental complex, is expected to begin leasing in January. And Ginsburg has broken ground a block away on a new project, a $21 million, 55-unit apartment building.


About the author

Bill Heltzel
Bill Heltzel has covered criminal justice, courts, government and sports – as a beat reporter and investigative reporter – for daily newspapers in Florida, Indiana, Ohio, and Pennsylvania. He worked for Bloomberg LP in training and sales. He joined The Business Journal in 2016.