Living in Legal Limbo

What a long, strange trip it's been. Two years after pleading guilty to criminal charges of racketeering and extortion, three management tycoons are still waiting to go to jail. Why?

Since the early '90s, when Manhattan District Attorney Robert Morgenthau and the lawyers in his office began unearthing a web of corruption between the city's foremost management companies and contractors supplying services for their buildings, more than 100 people, ranging from agents and board members to superintendents and contractors have been indicted on charges of receiving payoffs and kickbacks.

"In every case, the crime was essentially the same," declared Morgenthau, at his first press conference on the indictments in 1994. "Managers exploited the trust placed in them by their co-op clients and betrayed that trust by accepting kickbacks from contractors and suppliers. The cost of these kickbacks, of course, was passed along by the vendors to the shareholders, thereby raising the cost of living in these buildings as much as 10 percent."

After the first round of indictments, 72 managers pled guilty to kickback schemes, with 34 individuals agreeing to pay restitution in a special fund established by the district attorney's office to reimburse victims. And one manager went to jail. But that wasn't the end of the story.

The investigations continued and in 1999, 59 individuals and 21 corporations were cited in a new round of indictments by the Manhattan district attorney's office. The indicted included managing agents, management companies, building superintendents, architects, engineers, waterproofing contractors, and board members. This time, too, the corruption had spread to a federal level, with managers of government-sponsored Mitchell-Lama housing projects indicted in the kickback scheme.

The second round of indictments also scored some big fish in the city's real estate management pool: By mid-2001, Arnold Zabinsky, president of Elm Management, Michael Cantor, president of Cantor Real Estate Corporation, and Marvin Gold, president of Marvin Gold Management, had all pled guilty to receiving cash kickbacks from contractors who provided goods and services to the buildings they managed.

On September 27, 2000, Zabinsky confessed in state court that contractors "paid those kickbacks in order to secure work . . . At no time did I disclose [this] to the boards or shareholders of those buildings." The district attorney's office says Elm collected more than $600,000 in kickbacks, a figure disputed by Zabinsky.

On January 11, 2001, Cantor pled guilty, admitting that from October 1995 to February 1998, "I received cash kickbacks from contractors who provided goods and services to properties managed by Cantor Real Estate Corporation."

And on March 10, 2001 Gold pled guilty to accepting kickbacks from October 1987 to July 1998. "I had knowledge of this criminal enterprise and the nature of its activities because I managed and directed it." Gold has said he will pay $1 million in restitution.

The problem is that, although the men have pled guilty and face jail time of from one to six years, they have not been sentenced. In a deal worked out among the lawyers for the defendants and Judge James Yates, who oversaw the cases, the sentencing of Zabinsky, Gold, and Cantor would be delayed pending the outcome of a federal investigation of similar charges.

The Manhattan district attorney's office has declined to comment on the deal. And the assistant U.S. attorney handling the federal charges, Burton Ryan, also took a hands-off approach to the deal. Asked about the sentencing agreement, Ryan responded: "Our official position is that we have no position. If Judge Yates wants to sentence them, that's fine."

Asked about the deal the three defendants worked out with Judge Yates, Harvey Greenberg, and Andrew Lawler, the attorneys for, respectively, Marvin Gold and Arnold Zabinsky, declined to comment. Efforts to reach John Case, attorney of record for Michael Cantor, were unsuccessful.

Such silence and inaction do not sit well with James Samson, an attorney representing buildings that lost money in the kickback scandal. He maintains that the three defendants are getting preferential treatment because they are white-collar criminals and also setting a dangerous precedent for others tempted to skim from the top.

"They have good lawyers. They ought to be in jail," he says bluntly. A partner with Bangser, Klein, Rocca & Blum, Samson represents a number of co-ops where shareholders were ripped off by the kickback schemes, and says that, only now, after eight years, are buildings beginning to receive money from the restitution fund set up by the district attorney's office in 1994 for the first round of trials.

"If somebody held up a McDonald's and stole $10,000, they'd be in jail by now," Samson points out. "Until we throw some of these managing agents in jail for a significant amount of time for stealing, it will continue. And these are not agents who were underpaid. These were the owners of the company."