Real estate fraud Russell Mainardi mismanaged funds that
Put 54 low-income co-op residents at risk of losing their homes
AG James Bans Mainardi of Real Estate Business in New York
NEW YORK – New York Attorney General Letitia James and New York State Home and Community Renewal (UNHCR) Commissioner RuthAnne Visnauskas announced today that they have preserved a development affordable housing cooperative (co-op) in Rockland County. During a two-year investigation, the Office of the Attorney General (OAG) discovered that the building, located at 18-36 Columbus Avenue in Spring Valley, was at risk of foreclosure due to illegal misuse of co-op funds by real estate fraudster Russell Mainardi and his girlfriend, who acted as a property manager for the co-op. Mainardi and his girlfriend grossly mismanaged the building’s finances for personal gain, putting residents at risk of losing their homes. With support from the Rockland Housing Action Coalition (RHAC), Community Preservation Corporation (CPC), and law firm Nixon Peabody, OAG and HCR were able to preserve and stabilize the property both financially and physically.
This agreement obliges Mainardi and his collaborators to pay $148,681 in compensation to the cooperative and $250,000 in penalties, forces his girlfriend to resign from her position as property manager and permanently prohibits Mainardi from developing real estate or financing projects. activities in existing residential properties in New York. The agreement also requires Mainardi to release $696,647.00 of liens it had improperly placed on the property.
“No one should risk losing their home because of someone else’s illegal and fraudulent actions,” said Attorney General James. “Mainardi and his associates have worked their way into the management of this affordable building and have brought residents to the brink of losing their homes through their fraud and deception. Access to safe, decent and affordable housing should be a basic right for all New Yorkers, and thanks to our partners at UNHCR, all of these people will stay in their homes.
“Throughout their fault, the owners of 18-36 Columbus Avenue were at serious risk of foreclosure, long-term financial distress and loss of their hard-earned homes,” said New York State Homes and Community Renewal Curator RuthAnne Visnauskas. “State intervention has ensured that this cooperative will remain affordable, well managed and in good condition. Located in an increasingly expensive area, 18-36 Columbus Avenue offers low- and middle-income residents the opportunity to access property that might otherwise be out of reach. We are grateful to the Office of the Attorney General, Rockland Housing Assistance Corporation, Community Preservation Corporation and Nixon Peabody for their full support in preserving this affordable housing resource that will benefit New Yorkers for decades to come.
“As New York continues to face a devastating housing crisis, the loss of existing affordable housing, particularly through mismanagement, is not an option for our communities,” said Brad Lander, New York City Comptroller. “New York City Retirement Systems is proud to participate with CPC in this investment through our public and private apartment rehabilitation program. I am grateful for the work of our partners across the state whose work has been crucial in helping ensure the preservation of this affordable co-op.
Built in 1970, 18-36 Columbus Avenue is a limited equity co-op originally funded by the federal Department of Housing and Urban Development. In the fall of 2018, following a complaint from a resident, OAG opened an investigation into the operations of the co-op. The investigation revealed that when the operator of the building – Spring Valley Housing Development Fund (HDFC) – had financial problems in 2014, Mainardi convinced the former chairman of the board to hire him to help the cooperative in its finances, but charged inflated rates. Mainardi misrepresented his experience and background, having never worked with a low-income co-op and hiding his conviction for mortgage fraud and tax evasion. He then installed his girlfriend in a “no-show” property manager position, charging the co-op twice for the same management tasks allegedly performed by their two entities. Mainardi also appointed the chairman of the board so that he would receive a salary as superintendent and not have to pay maintenance for his co-op unit, in violation of co-op board rules.
Other findings of wrongdoing against Mainardi included:
- Presenting fraudulent instruments to third-party lenders, inducing them to provide funds to the cooperative;
- Having the co-op incur hundreds of thousands of dollars in unnecessary fees on a second loan when an original lender discovered its fraudulent submissions;
- Failing to complete promised capital requirement projects and taking hundreds of thousands of dollars in cooperative loan proceeds for incomplete and unsatisfactory work; and,
- Spends general operating funds on personal goods and services.
As a result of these fraudulent acts, Spring Valley HDFC faced foreclosure when it quickly defaulted on high interest loans brokered by Mainardi. Fifty-four shareholders of low-income cooperatives were threatened with losing their property. The OAG helped stave off the co-op’s foreclosure when it recruited RHAC to work with co-op residents to elect a new board. The new board then hired RHAC as the co-op’s new property manager.
The CPC was able to provide a $3.7 million bridge loan to pay off the co-op’s existing underlying debt and related costs. CPC’s loan allowed the co-op to avoid its planned foreclosure auction and enabled the partnership to move forward with its preservation efforts.
Following the refinancing, the 54 homes will remain affordable for households earning no more than 120% of the region’s median income. UNHCR is also providing $3 million through the state’s Small Buildings Equity Loan Program to fund moderate rehabilitation activities such as roof replacement, security upgrades and HVAC repairs. CPC is providing an additional $2.8 million in construction funding for rehabilitation work and more than $2 million in permanent funding through its partnership with the office-managed New York City Retirement System. of the New York City Comptroller. The New York State Mortgage Agency’s Mortgage Insurance Fund provides mortgage insurance on the permanent loan.
“This is a major victory for housing justice in Spring Valley,” said U.S. Representative Mondaire Jones. “Code enforcement has been a long-standing problem in New York State, and I’m pleased the Attorney General’s office has concluded this investigation. It represents an important step toward ensuring safe housing for all.” New Yorkers and the accountability of corrupt developers. Thanks to the tireless work of the UNHCR Commissioner and the Attorney General’s Office, the homes of these residents are no longer at risk of foreclosure due to negligence and fraud. We must continue the fight to protect safe and affordable housing in Rockland County and all of our communities.
“I commend Attorney General James and UNHCR Commissioner Visnauskas for taking decisive action against the fraud and mismanagement that nearly cost Rockland co-op owners their homes,” said State Senator Elijah Reichlin-Melnick. “Owning a home is part of the American dream, and it’s hard enough to afford in Rockland without real estate fraudsters illegally exploiting people for their own personal financial gain. Great job by the Attorney General and UNHCR Commissioner for stepping in to protect co-op owners and to bar these bad actors from future real estate transactions in New York.
“Those who break the law must be brought to justice,” said Assemblyman Mike Lawler. “Anyone caught embezzling funds from co-ops and HOAs must be held accountable for their actions. These funds should never be used for personal purposes. It is particularly infuriating that someone attempted this with funds from a co-op designed to provide Rockland County residents with affordable housing.
“Across the state, the need for access to affordable housing continues to grow, and Rockland County is no exception,” said Assemblyman Ken Zebrowski. “When unscrupulous actors attempt to use these properties for personal gain, it puts hard-working families at risk of losing their homes and makes it harder to ensure our communities have the affordable housing stock they need. I thank Attorney General James for taking action against these individuals and for her ongoing efforts against real estate fraud.
“I’m proud that CPC was able to provide the funding needed to get the co-op back on its feet, and more importantly, to make sure its residents don’t lose their homes to foreclosure due to the negligence of a few bad actors. ,” said Sadie McKeown, President, Community Preservation Corporation. “With cities across the state facing a housing affordability crisis, mobilizing our resources to preserve existing affordable homeownership is more critical than ever to the stability and vitality of communities like Spring Valley. My thanks to Attorney General James, UNHCR Commissioner Visnauskas, as well as our partners at Nixon Peabody, RHAC, and shareholders for their perseverance.
This case was handled by Housing Protection Unit Chief Brent Meltzer and Assistant Attorneys General Hannah Baek of the Office of Internet and Technology and Jane Landry-Reyes of the Housing Protection Unit. The Housing Protection Unit is part of the Social Justice Division, which is led by Chief Deputy Attorney General Meghan Faux and overseen by Senior Deputy Attorney General Jennifer Levy. The Office of Internet and Technology is part of the Economic Justice Division, which is overseen by Chief Deputy Attorney General Chris D’Angelo and Senior Deputy Attorney General Jennifer Levy.