Bribery scandal rocks industry: No building owners implicated

Real Estate Weekly, March 6, 2002 by Parke Chapman, Elaine Mishonzhnik

No building owners have yet to be implicated in the tax scheme that shook the real estate industry last week with the indictment of 18 Manhattan tax assessors accused of cutting property taxes for bribes.

These indictments--part of an ongoing investigation by the Manhattan District Attorney, called Operation Knockdown--could be the tip of the iceberg, say industry sources. "Personally, I wouldn't sleep well at night if I paid someone to give me a lower property assessment. I choose to sleep at night," said Jonathan Zich, managing principle at the Burak Organization. Burak's 1.4 million-SF portfolio includes the Bar Building and 360 East 65th Street, among other properties. "It's a huge risk that an owner would take by bribing someone. I can't imagine that any law firms would take that risk either," added Zich.

Stephen Spinola, president of the Real Estate Board of New York, insisted that "99 percent". of owners are innocent of any wrongdoing.

"I don't believe that the city has been cheated out of any money. I believe that public statements about millions of dollars in lost revenue are just not true," said Spinola.

"People hire consultants that do work for them and Albert Schussler was a consultant who had a reputation of doing his job," added Spinola.

As many as 500 buildings worth $8 billion allegedly benefited from lowball assessments over 30 years, according to the indictment, and cheated the city out of $160 million over the past four years alone.. Investigators claim that property taxes account for one fifth of the $40 billion city budget.

Some of the Manhattan office towers named in the indictment were 9 West 57th Street, 52 Broadway, One United Nations Plaza, Le Parker Meridien and 277 Park Ave.

A complex system of covert codenames was reportedly used by those involved in the scheme. The New York Times report depicted a cadre of ostensibly lower. middle-class assessors with assets far outweighing their incomes.

The alleged ringleader, Schussler, is an 85-year-old tax consultant, accused of bribing assessors for decades and worked as a Manhattan tax assessor for 30 years until he left in 1967. "Schussler is a pretty well known character and this investigation has been in the works for a long time. A lot of people knew about it," said one real estate attorney.

Lawrence Fiedler, a professor at New York University's Real Estate Institute, questioned a system that could breed corruption so pervasively.

"The system itself is set up for corruption, it allows people to be corrupted," Fiedler said. "As Gordon Gecko said, 'Greed is good.' If you don't have a-system of checks and balances, these things happen."

As the investigation continues, many in the industry have speculated whether the DA's office will be targeted building owners. One attorney said, "The U.S. attorney is always looking for headlines. That means always going for the biggest fish--and that's the owners."

A broker who requested anonymity equated the news to a Manhattan version of the Enron debacle. "All of these high-level people will say that they didn't know about what was going on, just like the Enron executives in Houston," said the broker.