Routine Management Transition Becomes Logistical Nightmare Thanks to Factionalized Board
Sherwood Village B in Queens
June 2, 2015 — It is probably among the strangest exchanges between an outgoing management firm and an incoming management firm that you'll ever see. "We will not release anything until the corporation's accountant has performed a complete audit of all files," wrote Rachel Manhim, property manager at Rachlin Management for Sherwood Village B, a Queens co-op. She was responding to an e-mail from Abdullah Fersen, the president of Newgent Management, the incoming firm. He had written Manhim a number of letters requesting payroll documents, and paperwork with various city agencies, arrears statements, vendor bills, and also access to the co-op's money. Fersen was frustrated and surprised. Rachlin had been fired nearly a month before by the new board of Sherwood Village B, and it was dragging its feet. Fersen, a veteran manager, says he has never seen anything like it before — most transitions are perfunctory — and adds that he was forced to recreate many of the records by diligent research among shareholders, vendors, and various city agencies. "We had to go with our plan and recreate everything from scratch," he says.
Was Rachlin being unreasonable?
From the board's point of view, it was. Yet, if there is one thing that is clear about the past few years at Sherwood Village B, it is that nothing is crystal clear — except that the board was factionalized, the issues had become personal, and that (often contradictory) accusations were flowing freely from those on, and off, the board.
This is the story of what happens when warring factions begin to lose perspective and end up nearly destroying a co-op while purportedly trying to save it. "There was bad blood between the parties," recalls Emanuela Lupu, senior associate at Smith, Buss & Jacobs and the building's current attorney. "There [were] politics. It happens sometimes in buildings where you have different factions."
"They had been split for a long time," agrees Abbey Goldstein, a partner at Goldstein & Greenlaw, who had been the co-op's attorney for about seven years. "Depending on who was running and who might get elected, it could change the balance of power. And many of the shareholders were bordering on paranoid [over there, thinking that] everybody is a crook. I'm a crook, the accountant is a crook, the managing agents are all crooks. The board was split down the middle ever since the day I was involved."
Accusations
Sherwood Village B was born in 1960 when the federal Department of Housing and Urban Development (HUD) insured its 40-year underlying mortgage. For the next four decades, the co-op had to adhere to strict HUD guidelines. A longtime resident describes the early years of the co-op — 135 units in two six-story brick buildings — as "peaceful." Speaking on the condition of anonymity, a former board member observes: "It started to change when one individual started accusing the board and the professionals of being thieves. And it never stopped."
Meet the Desrosiers family, Joseph and Olga, who moved into the building in 1988. Joseph served as the board's treasurer from 1991 to 1995 and immediately began stirring things up. Convinced that the co-op was riddled with corruption and "fictitious billing," he got HUD and the Queens district attorney's office to open formal investigations. Neither found any evidence of financial wrongdoing. Goldstein says that after a while crying out "Corruption!" became tired. "I'm not saying there's no such thing as corruption or that boards shouldn't be wary," he observes. "[But] some members of the board have been saying 'corrupt, corrupt, corrupt' for a long period of time, without citing any evidence."
Indeed, during this period, Sherwood Village cycled through three management firms, with each company starting out as the new White Knight, and then departing some months later as the blackest of villains, corrupt to the core, joining the string of lawyers, accountants, and contractors who had been similarly accused by Joseph Desrosiers.
Who was right? What was going on? And how would the building cope? We continue on the nightmarish journey next Tuesday. Don't miss it!
Photo by Jennifer Wu