A federal judge has denied motions by the former treasurer of Trump Tower at City Center, and his associates, to dismiss a 2016 racketeering lawsuit filed by the White Plains condominium’s board of managers.
The judge also dismissed a counter-claim asserted by Frank Palazzolo, the former treasurer, accusing the board of unjust enrichment.
At this state in the proceedings, U.S. District Judge Kenneth M. Karas ruled on Sept. 28, the condo board has sufficiently alleged that Palazzolo and his associates “received and facilitated the receipt of numerous transfers totaling hundreds of thousands of dollars in allegedly stolen funds.”
The ruling comes on the heels of a $101.3 million sale of an apartment complex in Elmsford that was connected to alleged illegal transactions. Ridgeview Holdings II LLC sold the 418-unit Ridgeview Apartments complex to Ares Management, Atlanta, in July.
When developer Louis Cappelli opened Trump Tower in 2005, it almost immediately encountered financial difficulties. Palazzolo, who lived there, became treasurer of the condo board in 2007.
He was credited with getting the 35-story structure back on sound financial footing by negotiating payments from Cappelli to boost the reserve fund and by buying a parking garage and recreation deck from Cappelli.
He allegedly gained control of the board by loaning money to two board members and lining up support from business associates Stephen Tobia and Stephen Reitano, who were also on the board. They are co-defendants in the lawsuit.
Palazzolo is accused of transferring more than $8 million from Trump Tower accounts to a web of personal and business bank accounts he controlled, according to the lawsuit, and failing to return $668,271.
In one alleged scheme, Palazzolo and three associates created Ridgeview Holdings to invest Trump Tower funds in the Elmsford apartment complex. The garden apartments were developed by Cappelli, who is not a defendant in the lawsuit.
Palazzolo claimed in his answer to the lawsuit that Trump Tower benefited from his actions. He had been granted full control over the reserve account and could do what he wanted on behalf of the condominium. In 10 years on the board, he claimed, he had saved Trump Tower nearly $1.2 million. He had received no compensation for his work and he had given up multiple business opportunities.
The condominium was ostensibly managed by the Trump Corp., Manhattan, though the lawsuit alleges that Palazzolo controlled operations. But in 2015 a Trump Corp. employee noticed an unauthorized transfer of $1.2 million to RLA Holdings, a business connected to the Ridgeview Apartments deal.
RLA was owned by Tobia. Its address was 800 Central Ave., Greenburgh — also known as Palazzolo Plaza — where Palazzolo operated a real estate investment business.
The condo board removed Palazzolo as treasurer, but he remained on the board as a representative of the commercial entities.
Karas ruled that the condo board has sufficiently pleaded the elements of a racketeering conspiracy, under federal law, and the elements of unjust enrichment, breach of fiduciary duty and other charges under state law.
He dismissed Palazzolo’s counterclaim.
“Simply put, Mr. Palazzolo claims he was ‘granted broad, unfettered discretion and authority’ by the board to act on behalf of the board and condominium,” Karas said. “Effectively, Mr. Palazzolo seeks to recover the profits for opportunities that he willingly gave to the board and condominium, and of which he had no expectation of profit.”
Karas ruled in Palazzolo’s favor in denying the condo board’s motion to dismiss 20 of his defenses. The defenses are arguably redundant, Karas said, but there is no harm to the board in allowing them to stand, “as they are merely a general denial of the claims asserted against the Palazzolo defendants.”
Also named as defendants in the lawsuit are Palazzolo’s wife, Mary; Joseph Santangelo; Lorraine Distefano; Gina Thomas; F&M Funding; Premium Staffing; Premium Parking; Antoinette City Center; B.A.B. Group I; B.A.B. Group II; First Resource Funding; and Reda, Romano & Co.
In the Ridgeview Apartments transaction, the deed papers were signed by Santangelo as managing member of Ridgeview Holdings II. Documents granting assumption of mortgage to the new owner were signed by Santangelo and Reitano, and by Mark Bassani, as a guarantor, who is not a defendant in the lawsuit.