Lawsuit Based on Racketeering Act Seeks Ouster of Fifth Avenue Co-op Board

The Racketeer Influenced and Corrupt Organizations (RICO) Act was designed to help prosecutors go after mobsters. Recently it was used to bring charges against former president Donald Trump and his allies for their efforts to reverse the 2020 election results in Georgia. Now it'ss the basis for a lawsuit in a tony co-op on Manhattan's Museum Mile, where two shareholders accuse the entrenched board of running a criminal "racket" in the building.

The lawsuit in Manhattan Supreme Court was filed by the married shareholders Elizabeth Sawyer and Clifford Press, who have lived in the building for three decades, The New York Post reports. The suit names 13 current and former board members as defendants. It claims that the board's offenses include: paying former president John Breglio's cousin $500,000 to perform an unnecessary and shoddy elevator repair; handpicking board members without holding open elections; and trying to extort a shareholder into returning a $300,000 settlement he'd received from the board after suing it for stopping renovations on his apartment.

“Racketeering enterprises are not confined to the docks of Brooklyn or the markets of the Bronx,” the lawsuit claims. “A racket has been operating for over a decade in plain view and with impunity on a tony stretch of upper Fifth Avenue. Hidden behind the limestone façade of a Museum Mile neoclassical is a corrupt group of entrenched cooperative directors who are exploiting the corporation by their criminal and other bad acts."

The lawsuit seeks the ouster of the current board of directors at the 44-unit prewar building, along with a ban on them serving on future boards. The suit also seeks unspecified damages and plaintiffs' attorneys' fees.

The board's lawyer, Michael Pensabene, a member at Rosenberg & Estis, replies: "This meritless lawsuit was brought by a disgruntled co-op resident for the sole purpose of harassing her neighbors, who voluntarily serve the building on the co-op’s board. This is a flagrant abuse of judicial process, and we are confident that this frivolous complaint will be promptly dismissed.”

David Clossey, the board's current secretary, adds: “This is all nonsense. I’m one of a group of volunteer directors who devote their time to making sure the building is run correctly, and that’s what we do. We have a very nice, wonderful, wonderful, wonderful building here, and we’re very proud of it." 

Regardless of how the lawsuit plays out in the courts, it offers s a valuable reminder for all co-op and condo boards: they should avoid even an appearance of a conflict of interest. It invites trouble.