SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS ----------------------------------------------------------------x GRAND LIVING J1 LLC, TOBY MOSKOVITS, ) MY 2011 GRAND LLC, S&B MONSEY, LLC and ) MOSHE DOV SCHWEID. ) Index No. 50439612017 - against - YOEL GOLDMAN and ALL YEAR MANAGEMENT, Plaintiffs, ~ AFFIDAVIT OF ISRAEL DAVID ) FRIEDMAN IN OPPOSITION TO ) PLAINTIFFS' MOTION FOR ) PRELIMINARY INJUNCTION Defendants, --------------------------------------------------------------- x ST ATE OF NEW YORK ) ) ss.: COUNTY OF KINGS ) ~ Motion Sequence # I ISRAEL DAVID FRIEDMAN, being duly sworn, deposes and says: I. T am a member and Manager of Defendant, All Year Management LLC ("A YM"}. and submit this affidavit in opposition to Plaintiffs' motion for a Preliminary Injunction. In particular, I wish to respond to the false assertions made by Plaintiffs that AYM has engaged in wrongful conduct in connection with its management of Grand Living II LLC ("GRAND IT'' or the company"'), which is the sole member of Grand Living LLC ("Grand Living''). which owns the property located at 227 Grand Street, a/k/a 687 Driggs Avenue, Brooklyn, New York (the "Property''). I have personal knowledge of the facts contained in this affidavit, except as otherwise indicated. 2. To convince this Court to grant an injunction that will take away from A YM management of the Property which it has managed successfully and ably for over five years, Plaintiffs have taken a number of minor and unfounded complaints, and portrayed them as a "crisis" that threatens the financial health of the Property, Grand Living and Grand JI. The truth ) ) 1 of 12
is. not only is there no "crisis," but there are no threats at all to the financial health of the Property. Grand Living and Grand H. 3. As I explain below: (a) No money has been misappropriated from the Company or Grand Living-- the money is and always has been in Grand Living's bank accounts, or used for the Property's expenses. and Plaintiffs know this is so because they have had full access to the Grand Living bank records and operating information. (~~ 7-22 below). (b) The financial health of the Property, Grand Living and the Company are strong, and the Property continues to generate approximately $1 million in annual distributions to its owners. (~~ 23-29 below). (c) There are no problems-- let alone serious problems -- with the management of the Property. To the contrary, the Property is extraordinarily maintained and is a sterling example of how a Property should be managed. (See,~ 30-34 below). Ms. Moskovits' problems with the garage door can be remedied if she and her colleagues want to authorize the cost of replacing it. Goldman, as Manager of Grand TT, has already approved the cost of replacing the garage door. It is Moshe Dov Schweid, the other Manager of Grand II that has, to date, refused to approve that cost. 4. Indeed, there had been no complaints made by any of the Plaintiffs regarding A YM's management of the Company and Property for the last five years until about two weeks before last September 30, the date when Moskovits' defaulted on the $7 million Promissory Note she owed to Mr. Goldman. I note that Michael Lichtenstein ("Lichtenstein"), Moskovits' partner, sent me a text message on September 21, 2016, when I responded to requests for information and l asked him what he "sees that I don't" with regard to the management of the Property. 2 2 of 12
Lichtenstein's text stated: 1 called you asking you not to take things personal. h's part of the overall thing.'' (See Goldman Aff., Exhibit 3, and see Index No. 518077/20 t 7. NYSCEF Doc. Nos. 18). 5. This lawsuit and this motion are simply an attempt to sway the Court by making new arguments against the motion Mr. Goldman made for an injunction in the lawsuit he filed in October. and which is awaiting decision by the Court. 6. As explained in more detail in the Affidavit of Yoel Goldman in opposition to Plaintiffs' motion, Plaintiffs improperly tried to terminate Goldman as Manager, and A YM as property manager, only moments before Ms. Moskovits defaulted on repayment of the $7 million loan because she knew that after her default, Goldman would be entitled receive shares given as security which would make him the majority member of Grand II and give him sole control. A. No Money Has Been Misappropriated From the Company 7. Plaintiffs assert that money from tenant security deposits was "misappropriated." This is untrue, as Plaintiffs well know. 8. Plaintiffs are objecting to the transfer in February, 2017, of$96,643 from the Grand Living JP Morgan Chase account to the Grand Living Santander account (which reduced the amount of the monthly distribution to the Company's owners). As I explain below, this simply reversed a decision by Plaintiffs four years earlier to hold some of the security deposit money in the Grand Living JP Morgan Chase account. 9. First. the Court should understand that Plaintiffs have always had full information regarding the financial affairs of Grand Living and the Company. Plaintiffs receive detailed monthly reports from A YM showing, among other things, the cash flow in and out of the Grand Living JP Morgan Chase account, deposits, repayments of security deposits when a tenant departs. and all checks that are written (see for example Exhibits 8 through 12 attached hereto). 3 3 of 12
10. In addition. each month, Joel Schweid, (the son of Plaintiff Moshe Dov Schweid. the other Manager of Grand II), on behalf of his father, the other Plaintiffs and Lichtenstein, sits with me or Joel Greenfeld. and goes over each deposit and payment or withdrawal for that month as reflected on that month's bank account statement. If there was any clarification needed with regard to any payment or withdrawal, Joel Schweid questioned it and received a satisfactory answer. Importantly, all major payment decisions were done jointly with Joel Schweid, on behalf of the Plaintiffs and Lichtenstein, and me or Joel Greenfeld. 11. Moreover, contrary to Moskovits' assertion, (Moskovits Aff.,,, 69). Plaintiffs have always had constant on line access to the Grand Living JP Morgan Chase account. Plaintiffs' employee Miriam Gross has internet access to the account statements and Ms. Gross regularly logs into the Grand Living JP Morgan Chase account. Joel Schweid also has access. I know the log in access information for Miriam Gross and Joel Schweid and thus I know when they log in. 12. In or about 2012, the mortgage on the Property was refinanced with Sovereign Bank, now Santander Bank. Prior to the refinance (during the construction phase), tenant security deposits, if any, were held in the Grand Living JP Morgan Chase account. 13. After the refinance. Santander Bank required that the tenant security account be held with it. I was specifically instructed by Lichtenstein, on behalf of the Majority in Interest Members. to only move approximately half of the tenant security deposits to the Santander bank account and to leave the remaining tenant security deposits in the Grand Living JP Morgan Chase account. Following Lichtenstein's instructions, that is what I did. 4 4 of 12
14. Accordingly, on January 10, 2013. AYM transferred $89,925.00. representing a portion of the tenant security deposits, from the Grand Living JP Morgan Chase account to the Grand Living account with Santander Bank. Attached as Exhibit 13 is a copy of the Santander Escrow Master Checking bank statement for Grand Living for the statement period January J, 2013, showing that on January 10, a deposit of$89,925.00 was made described as the "Funding Tenants Account." 15. Neither the Plaintiffs nor Joel Schweid nor Lichtenstein ever informed me or anyone else at A YM that. contrary to their prior instructions. they now wanted the full amount of the tenant security deposits to be held in the Grand Living Santander bank account. A YM only learned this from a letter that Plaintiff Moskovits and Lichtenstein had submitted on their behalf to the Israel Securities Authority dated February 9, 2017 (the ''ISA Letter'') (see Exhibit I to the Goldman Aff.). 16. I note, again, that it was the Plaintiffs and Lichtenstein that instructed A YM to keep tenant security deposits in the Grand Living JP Morgan Chase account. A YM followed those instructions, only to find out that Moskovits and Lichtenstein complained to the fsa that we did what they instructed us to do. 17. After learning of the ISA letter, and to comply with Plaintiffs' conflicting instructions which was contrary to what Plaintiffs instructed us previously, Goldman instructed A YM to transfer from the Grand Living JP Morgan Chase account to the Grand Living Santander account an amount equal to the difference between the amount being held in the Grand Living Santander account and the total amount of tenant security deposits. A YM followed Goldman's instructions. Attached as Exhibit 14 is a copy of the Santander Escrow Master Checking bank statement for Grand Living for the statement period February 20 I 7 showing that on February 13. 5 5 of 12
a wire transfer was made from the Grand Living JP Morgan Chase account to the Grand Living Santander bank account in the amount of $96,643.00, which reflects the deposit of the remaining tenant security deposits. 18. Notably, the money was not wired to me or to Goldman or to A YM or to any of Goldman's other companies. The funds remained in the possession of Grand Living at all times, either in the Grand Living JP Morgan Chase account or the Grand Living Santander account. 19. In response, Plaintiffs filed this action, once again complaining about the actions of A YM, when all A YM did was fix what they had complained about. 20. Contrary to her assertion, (Moskovits Aff. ~ 22), there was only one time (not multiple months) that Moskovits inquired of me and Joel Greenfeld as to the reason for the reduction in a monthly distribution (there were no previous reductions, Joel Schweid told us on behalf of his father how much money was to be distributed to the Members and Mr. Goldman as Manager had us follow Joel Schweid's father's instruction) and that was for this past February 2017. Joel Greenfeld and r replied that because of the accusation she and Lichtenstein made in the ISA letter, Goldman instructed AYM to transfer the $96,634, representing the remaining tenant security deposits, from the Grand Living JP Morgan Chase account to the Grand Living Santander account. 1t bears repeating - Goldman and A YM did exactly what Plaintiffs and Lichtenstein wanted done. There has been no misuse or theft of any tenant security deposits by A YM or Goldman. 2 I. A day before we received notice of this lawsuit, Joel Greenfeld and I met with Joel Schweid to discuss the monthly bank statement and the amount of the distributions to be made to the owners. During that meeting, Joel Schweid learned that the $96,634 was transferred to the Grand Living Santander account. At that meeting, Joel Schweid said to me and Joel Greenfeld 6 6 of 12
that this was the right thing to do. Joel Schweid did not request that A YM put the money back into the Grand Living JP Morgan Chase account and he instructed us to distribute the $20,000 remaining in the Grand Living JP Morgan Chase Account. 22. Moskovits' assertion, made "upon information and belief," (Moskovits Aff. ~ 26), that Defendants have used funds from the Grand Living operating account to cover expenses relating to other properties controlled by Defendants is false. It bears repeating that, each month. Moskovits (and Plaintiffs) received the monthly reports of money coming in and going out of the Grand Living operating account and Joel Schweid sat with me and/or Joel Greenfeld to go over every payment that was made out of the Grand Living operating account. If there had been any money withdrawn or paid out of the Grand Living operating account that appeared improper (which there was not), Moskovits or Joel Schweid would have pointed that out and demanded an explanation. But they never did because it never happened. Joel Schweid always told me that he was happy with AYM's management of the property. At our most recent meeting, when I asked Joel Schweid if Plaintiffs new management company can do a better job managing the Property than A YM, Joel Schweid had no answer other than to say "that is what they want." B. The Company's "Economic Viability" is Not at Risk 23. Plaintiffs' resort to inflammatory language about the "economic viability" of the Company and Property being.. at risk." What they do not bother to do is provide any evidence -- because there is no evidence. 24. The one specific claim they make is that $96,634 was misappropriated," but as I explained above. all that we did was move money from one Grand Living bank account to another to take care of the concern raised by Plaintiffs about the security deposits not being in the tenant security account. ff. as they claim, that is required by law. and by the mortgage loan agreement, they cannot complain that the problem was fixed. 7 7 of 12
25. While Plaintiffs may have been unhappy that the $96,634 transfer reduced one monthly distribution to the owners, which at the meeting I had with Joel Schweid, he said it was the right thing to do, and while Plaintiffs complain about A YM's management of the Property. they do not mention the distributions the Company made to the owners in 2014, 2015 and 2016. ln 2016. over $800,000 was distributed (see Exhibit 10); in 2015, over $1 million was distributed (see Exhibit 9); and in 2014 over $700.000 was distributed (see Exhibit 8). And, in the first two months of 2017, even with the $96,634 reduction, more than $400,000 was distributed to the owners. (See Exhibits 11 and 12 attached hereto.) 26. All bank loan payments have been made, expenses are paid in the regular course of business. there are no residential vacancies, and residential rent collections are current with few arrears. 27. The only conduct that threatens the economic wellbeing of the Property and the Company is conduct of the Plaintiffs. Their attempt to remove Mr. Goldman as Manager, and to fire A YM are in direct violation of the terms of the mortgage loan agreement. 28. And, in a display of blatant self-dealing, for over three years they have occupied office space in the Property, but they have not paid any rent to Grand Living for space that is worth at least $9,000/month on the open market, which would have brought $325,000 to the Company had Plaintiff paid market rent or allowed the space to be rented to a tenant that would have paid market rent. 29. The biggest threat to the Property and Company's economic health is (i) Moskovits' reckless threat to instruct tenants not to pay rent to A YM, (Moskovits Aff. ~ 81 ), and (ii) Plaintiffs' insistence on changing the property management to their new management company. While the Court will decide -- at the conclusion of Mr. Goldman's lawsuit who should be managing the 8 8 of 12
Property. Ms. Moskovits' threatened action will cause tremendous confusion and concern. and will disrupt the cash flow that has been faithfully received and distributed by A YM for over 5 years. A YM has a proven track record doing an extraordinary job managing the property and distributing approximately $3-4 million over the last five years to the owners. Jn attempting to change the management to their company, Plaintiffs are acting for their own self-interest and threatening serious injury to the Company and Goldman. A change in management to Plaintiffs' management company will likely cause a significant loss of distributions to the owners. Plaintiffs have yet to complete construction or receive a certificate ofoccupancy on any of the properties they own. All the construction that they are involved in are way over budget by at least double or triple of the estimated budget. C. A YM Has Ably Managed and Maintained the Prooerty 30. A YM has been managing the Property pursuant to a Management Agreement that has been in effect since 2011, before the first tenant moved in. A YM is an experienced property manager and its management of the Property has been of the highest quality. The building is we!i maintained and extraordinarily clean; the rents are collected; the residential units are fully leased, and the cost of A YM"s services is substantially below market. The building generates profits which are regularly distributed to its owners. 31. The vacancy rate for the residential units in 2016 is 0.0020%, and for 2015 was 0.0071 % compared to the overall market vacancy rate in the area of more than 2%. There are no tenant rent arrears in excess of 30 days. 32. Jn the Affidavit that 1 submitted in Mr. Goldman's 2016 Grand 11 Action (see Goldman Aff., Ex. 3), I stated, among other things, that AYM had been doing an excellent job managing the Property, the Property was well maintained, the vacancy rate for residential units was very low, there were no tenant arrears in excess of 30 days and that because of A YM's 9 9 of 12
successful and efficient management of the Property, it is profitable and distributions are regularly made to the owners. 33. In opposing Goldman's motion for an injunction in the 2016 Grand IT Action. neither Lichtenstein nor Moskovits said anything about Defendants having mismanaged the Property or the Property being poorly maintained. Nor did Plaintiffs say anything about distributions to members of the Company being repeatedly and unilaterally reduced by Defendants. 34. Clearly, these new accusations have been invented to give Plaintiffs a way to come to the Court before the Court decides Goldman's motion for a preliminary injunction in the 2016 Grand JI Action. Nothing about Plaintiffs allegations is so urgent that an injunction is needed. 35. Nevertheless, Jet me briefly respond to some of the claims contained in Moskovits' affidavit. (a) Problems with Garbage - Garbage is disposed of on garbage days. If the recycling does not fit in the garbage area, it is placed in a corner of the parking area until garbage day. Any vermin problem is caused by construction by the Plaintiffs of their office space which has holes in the wall, and a hole in the bike room. They have not yet allowed A YM to close those holes. Plaintiffs brought old wood to redo their office and that wood contained termites - so now they have a termite problem in the office for which they do not pay any rent and for which the Company could have been making an additional $325,000. Plaintiffs keep garbage in the bike room despite the fact that I have told them numerous time to put their garbage in the garbage room. (b) Problems with access to the Bank Operating Account- Goldman and A YM did not "shut down the Property's operations account at JP Morgan" (Moskovits Aff. ~ 69). Rather, when banking online, the bank's website requires a user to create an ID and password in order to access the online account. If a user puts in an incorrect password three times, the bank's website 10 10 of 12
.. locks'' the online access until that user calls the bank and asks for access to be restored. If one user gets locked out then all users are locked out. That is all that happened. The only time that Plaintiffs did not have access was if either I or Joel Greenfeld was locked out and all users had to wait until online access was restored by the bank. (c) Need for Sample Leases and an Insurance Certificate- We provided copies of several leases to Plaintiffs, as well as the requested insurance certificate. Plaintiffs have not turned over the signed commercial lease they obtained nor have they turned over the rent or security deposit for that commercial lease. I just learned that Plaintiffs' new management opened a new account for Grand Living and have placed the security deposit for the new commercial lease in the new account. While Plaintiffs have provided me with the account number and user JD for this new account, they have not provided me with the password so that (can log on to the new account. (d) Abe Friedrich Criminal Matter - This does not involve the Property, and the alleged conduct by Mr. Friedrich was not authorized or instructed by A YM. Mr. Friedman is defending the matter personally and A YM is not paying his legal fees. By contrast, it appears that Moskovits and Lichtenstein have opened a new management company in order to conceal the fact that they have in the past managed property in Philadelphia which resulted in the death of two firefighters. That is of grave concern if they were allowed to have their new management company manage the Property. 11 11 of 12
Conclusion injunction. 36. r respectfully ask that the Court deny Plaintiffs' request for a preliminary ISRAEL DAVID FRIEDMAN 12 12 of 12