The attorney for a Westchester County businessman accused of racketeering by managers of Trump Tower at City Center in White Plains called the recent lawsuit a “witch hunt” against his client, whom his accusers claim used the building”™s funds as a “private piggy bank.”
The Trump Tower board of managers on Nov. 28 sued Frank Palazzolo, the board”™s treasurer from 2007 to 2015, in U.S. District Court in White Plains for allegedly diverting $8.7 million from the high-rise downtown condominium. The management board maintains its office at the Trump Corp. in Manhattan,
“Palazzolo used his financial acumen, business skills and charm to ingratiate himself and become a seemingly indispensable member of the board,” the lawsuit says. “The condominium”™s reserve funds became Palazzolo”™s private piggy bank.”
The lawsuit says he “borrowed” $8.7 million but failed to replace $1.3 million. Palazzolo and other defendants variously face civil charges of racketeering under the Racketeer Influenced and Corrupt Organizations Act, bank fraud, mail and wire fraud, breach of fiduciary duty and several other charges.
The lawsuit also names his wife, Mary Palazzolo, and associates Stephen Tobia, Stephen Reitano, Joseph Santangelo, Lorraine DiStefano, Gina Thomas, Lori Overton and several businesses.
Trump Tower at City Center is a 215-unit, 35-story structure developed by Louis Cappelli and managed by Trump Corp. It opened in 2005 and almost immediately encountered financial difficulties.
In 2007, Palazzolo, who owned a unit in the building, became the board”™s treasurer. He was credited with getting the condominium back on sound financial footing by negotiating for payments from Cappelli to boost the reserve fund and by buying the garage and recreation deck from the developer.
The lawsuit says Palazzolo used business relationships to control the board. He loaned $500,000 to one board member whose business was failing and substantial sums to another. Co-defendants Tobia and Reitano were also on the board. That gave him five votes out of seven.
The lawsuit says Palazzolo marginalized Trump Corp., which managed the reserve and operating accounts. He instructed the corporation not to attend board meetings and authorized a $100,000 annual fee for Trump Corp. to manage only the operating account.
That left Palazzolo in control of the reserve fund, the lawsuit says, for which he was the sole signatory.
He is accused of linking the Trump Tower accounts to his personal and business accounts, allowing him to move millions of dollars back and forth to help finance his enterprises.
He evaded detection for several years by opening and closing several bank accounts and rapidly transferring funds, according to the lawsuit. He and his associates created fraudulent bank documents that fooled the Trump Corp., the board and the condominium”™s lawyers and accountants.
A fabricated bank statement, for example, showed that the Trump Tower reserve accounts had $940,472 in 2013 when they actually had $5,372.
Besides the reserve account, the lawsuit says he stole funds from a garage account, insurance payments for damages caused by Hurricane Sandy, vendor checks and electricity payments. He allegedly replaced Trump Corp. companies that provided security, lifeguards and parking services with two companies that he controlled.
The board replaced Palazzolo’s companies after removing him from the board and has since saved $500,000 in staffing costs.
In one scheme, the lawsuit says, Palazzolo and three associates created Ridgeview Holdings to invest diverted money in a Cappelli real estate project in Elmsford. Cappelli is not a defendant in the lawsuit.
He is also accused of using condominium money to buy three foreclosed units in the Trump Tower.
In 2014, Palazzolo insisted that the board replace its accounting firm, claiming it had doubled its fees, and hire Reda, Romano & Co. The Rye Brook firm, according to the lawsuit, was complicit in Palazzolo”™s enterprises and is named as a defendant.
As reserve accounts dwindled, the condominium could not afford necessary repair work.
By 2015, residents were raising concerns about Palazzolo and condominium finances, and a Trump Corp. employee noticed an unauthorized transfer of $1.2 million to RLA Holdings, a business with an address at Palazzolo headquarters in the town of Greenburgh.
The two board members who had received large loans from Palazzolo, and who are not defendants in the lawsuit, resigned. New members wrested control of the board. Palazzolo was removed as treasurer but remains as a representative of the condominium”™s commercial entities.
The lawsuit also names as defendants businesses that share office space at Palazzolo Plaza at 800 Central Ave. in Greenburgh: B.A.B. Group I, B.A.B. Group II, F&M Funding, First Resource Funding, Premium Parking, Premium Staffing, Ridgeview Holdings and RLA Holdings. Defendant Antoinette City Center is in the Trump Tower in White Plains.
“I am confident that he will be completely vindicated,” said Palazzolo”™s attorney, Lawrence Gottlieb, of Hass & Gottlieb in Scarsdale. “This is really a witch hunt.”
He said the condominium board presented Palazzolo with its findings in February and he responded in writing to every allegation in April. If anything, he said, Palazzolo”™s actions benefited the condominium. He said the civil racketeering allegations in particular will be impossible to establish.
“I”™ve known and represented Frank for nearly 20 years. He is an extraordinary, intelligent self-made businessman,” Gottlieb said.
In 2004, The New York Times cited New York City officials who said Palazzolo was linked to buildings with 19,000 code violations. In 2010, the Village Voice named him as one of the 10 worst landlords in New York. Â Palazzolo has insisted that he”™s just a dealmaker for landlords, not a landlord himself, the Village Voice reported.
