A Yonkers flooring contractor claims that a concrete supplier provided defective materials that ultimately forced the company into bankruptcy. But the concrete supplier disputes the allegation.
East Hudson Level Flooring Systems Inc. filed a Chapter 11 petition April 16 in U.S. Bankruptcy Court in White Plains, declaring nearly $1.4 million in assets and $3.3 million in liabilities.
The company “experienced a series of crippling losses directly attributable to its main concrete supplier, Daro Metro NYC Inc.,” CEO Margaret DeFeo stated in a court filing.
But Brooklyn-based Daro Metro NYC claims in lawsuits filed in Westchester and New York City Supreme Courts four days before the bankruptcy filing that an East Hudson official had diverted funds and committed fraud.
East Hudson was organized in 2013 as a subcontractor that specializes in installing commercial flooring.
It was operating profitably, DeFeo states in a court filing. Last year, it booked nearly $4.9 million in gross revenue, and the year before $3.1 million.
But Daro Metro NYC supplied defective materials for several projects, DeFeo alleges, and East Hudson had to spend more than $1 million replacing the materials.
The bankruptcy petition shows more than $1.3 million in accounts receivable. Yet, more than $800,000 has been frozen, DeFeo claims, because Daro Metro NYC has filed improper mechanic’s liens, “spiraling the debtor (East Hudson) into insolvency” and leaving it unable to pay suppliers, ordinary expenses and overhead costs.
The bankruptcy petition lists a $1,251,743 claim by Daro Metro NYC as disputed, and DeFeo said the company will press significant claims against Daro.
East Hudson has insufficient capital to complete current jobs or jobs that have been booked, DeFeo said, and it was forced to suspend operations in February. She said it is unlikely that it can continue in business because of the “irreparable harm” to its reputation caused by Daro Metro NYC.
The bankruptcy petition will enable East Hudson to marshal assets, collect debts and pursue legal claims, she said, “to maximize the return to all creditors.”
Daro Metro NYC paints a different picture in two lawsuits. It says it delivered concrete last year to East Hudson projects on Coney Island, for $64,404, and West 61st Street, Manhattan, for $620,933. East Hudson, it claims, has refused to pay the bills.
Daro Metro NYC accuses East Hudson of creating several companies with similar names that are actually undercapitalized shell companies.
The lawsuits identify Michael Falzarano of Yonkers as the controlling shareholder of the enterprise.
In the bankruptcy petition, Falzarano is listed as vice president, Michael Carpentieri of Monroe as president, DeFeo as CEO, and each as a one-third owner.
“Falzarano diverted funds from the East Hudson companies to his personal use,” Daro Metro NYC alleges, “commingled funds with the East Hudson companies and used companies with confusingly similar-sounding names to defraud creditors.”
Attempts to get a response from Falzarano failed, when no one answered telephone calls to two numbers listed in his name.