An arbitration panel has ruled that Greenwich real estate developer John Fareri owes $14.3 million to a construction management company and executive who oversaw construction of the Villa BXV condominium in Bronxville.
Fareri testified during a hearing before the American Arbitration Association that he was unaware that employees had fabricated documents that decreased the money he owed to the construction management company and that increased tax credits for himself.
The arbitration association found his defense implausible, ruling on April 23 that his explanations for documents prepared for nefarious purposes solely for his personal benefit, and placing him “in serious criminal jeopardy,” were unpersuasive.
The dispute goes back to 2015, when Bronxville chose Fareri Associates to develop condominiums on a former industrial site on Kensington Road, at the edge of the village”™s business district. Fareri formed Gateway Kensington LLC to buy, clean up and develop the property, and The Gateway Development Group Inc. to manage construction.
Fareri owned 99% of Gateway Kensington and 51% of Gateway Development. James Carnicelli Jr. of Scarsdale owned 49% of the construction management firm and ran its day-to-day operations.
Fareri applied for the New York Brownfield Cleanup Program that would allow him to receive income tax credits for cleaning up the property and for building the condos.
By late 2016, the cleanup was done. In 2017, Fareri applied for Brownfield tax credits.
After New York requested documents to support the credit, Fareri employees fabricated new work invoices to match the numbers on the claim for a tax credit, according to the arbitration association.
In 2018, New York Department of Finance certified a tax credit for Fareri of nearly $6.3 million.
A year later, Carnicelli was disputing his compensation for managing the Villa BXV construction; Fareri fired him.
A Fareri employee then notified the New York Audit Bureau that the costs had been overstated for the site preparation tax credit and on a pending tax credit application for building the condos.
Carnicelli demanded arbitration, claiming that Gateway Kensington owed him and Gateway Development Group nearly $14 million, for breaching the construction management contract.
Two sets of records had been created, he claimed, one to increase the tax credits and the other to minimize management fees owed to Gateway Development Group.
As majority owner of both companies, Carnicelli said, Fareri “refuses to explain the substantial discrepancy between the records submitted to the State of New York and those submitted to Development.”
Initially, Fareri did not dispute the construction management contract, according to the arbitration association, but claimed that Gateway Management had overbilled for its work and owed nearly $3 million to Gateway Kensington.
Fareri withdrew that defense, and on the eve of the arbitration association hearings last December he claimed that the construction management agreement was not valid because it was created for a fraudulent purpose.
He conceded that the contract and new invoices were created solely to support a greater tax credit for himself, but claimed he had been unaware of the fabrications and he was trying to correct the tax forms.
The arbitrators ruled that the construction management contract with Gateway Kensington is valid and must be enforced.
Fareri”™s testimony that he was unaware of activities and tax filings that “inured only to his personal benefit” was not credible, the arbitrators said, and they found “no credible evidence to support a finding of fraud by Carnicelli.”
The arbitration association ordered Gateway Kensington to pay $14.2 million to Gateway Development Group, $104,640 to Carnicelli individually, and $193,169 in arbitration fees.
Fareri Associates and Gateway Kensington”™s attorney, John Tesei, did not respond to emails requesting comment.
