Reproduced with permission of The Scarsdale Inquirer.
© 2004 S.I. Communications, Inc. All Rights Reserved. Published in The Scarsdale Inquirer on Friday, July 2, 2004.
Lawsuits loom on town hall sale
By LAURIE SULLIVAN
What Greenburgh Town Supervisor Paul Feiner hailed as a coup, the acquisition of 177 Hillside Ave. as the new town hall in 2002, is now under scrutiny with two lawsuits filed in state Supreme Court in White Plains in April and May.
Embroiled in the middle of the controversy is town assessor Gerry Iagallo, who negotiated the deal with One Beacon Insurance to acquire the 48,000-square-foot building.
At issue are tax certioraris Iagallo granted One Beacon as an inducement to sell the building to the town, and the role the insurance company's law firm played in representing both buyer and seller in the tax certiorari proceedings.
The law firm, Huff Wilkes, first moved in April to depose Iagallo about why it believed the town overpaid for the building. Huff Wilkes brought its motion after the town refused to pay its $43,000 fee for certiorari work.
The town filed a cross motion to disqualify Huff Wilkes as attorneys for the town based on conflict of interest.
All parties seem to agree that Iagallo was approached in late summer 2002 by Huff Wilkes attorneys, who were seeking a tax reduction on the property, then assessed at $10 million. They were seeking a reduction to $5.5 million based on a pending sale/lease-back agreement at that price. (The structure cost $12 million to build in 1992.)
When Feiner announced the town's impending purchase of the building, he said Iagallo had told him it would be ideal. Feiner authorized him to negotiate for the town. Iagallo brokered the deal at $6.9 million. Although not mentioned anywhere in the closing documents, he offered One Beacon a reduced assessment, valuing the building at $6.1 million. Iagallo valued the same property for the town at $7.8 million.
Iagallo had also agreed to pay Huff Wilkes $43,000 for tax certiorari work for the town.
The agreement between Iagallo and Huff Wilkes was never approved in writing by town attorney Susan Mancuso nor the town board. Huff Wilkes claims the deputy town attorney Peter O'Hara was aware of the agreement.
The deal, which closed December 2002, called for the seller, One Beacon, to get the benefits of a tax certiorari proceeding for 2001, while the town would get the benefits for a much smaller tax reduction for 2002.
Seven months later, Huff Wilkes asked for the $43,000. According to a transcript from a March 9, 2004, town board work session recorded by Greenburgh resident Ella Preiser, town attorney Susan Mancuso said that no agreement had been signed binding the town, and she was unaware of any agreement. According to Iagallo, deputy town attorney O'Hara had been told about the agreement last summer shortly before his (unrelated) resignation.
At the March 9 meeting, Mancuso asked attorneys Jean Huff of Edgemont and David Wilkes why their firm was entitled to $43,000. Neither could justify why they were billing the town. Apparently unable to satisfy Mancuso, Huff said, "You wouldn't have this deal if it hadn't been for us."
Mancuso, Huff and Wilkes appeared before the judge's clerk this past Monday, June 28, along with Judson Siebert of Keane and Beane, counsel for the Central 7 school district. The proceedings were adjourned to Aug. 26.
At the town supervisor's request, the Inquirer e-mailed him a list of questions; he then refused to answer claiming the matter is in litigation.
In a telephone interview, Iagallo said he was unaware that Huff Wilkes wanted to depose him. He claimed Mancuso had never told him and refused to answer questions regarding the pending litigation.
Mancuso also declined to comment.
Multitude of ethical issues
According to Mancuso's affidavit, "Despite Huff Wilkes' alleged status as town's counsel, and despite the fact that the town had by last July owned the property for seven months, the firm had never presented us with an engagement letter, sent any correspondence detailing negotiations and other actions the firm took on the town's behalf ...and indeed what would Huff Wilkes report to the town? That it was negotiating with the town assessor - a town employee - to induce him to reduce the assessment? In other words, the fee appeared to represent us in persuading ourselves to take an action."
Mancuso argues that "the only reason this matter is before this court is that Huff Wilkes appears to be attempting to punish the town for not acceding to its demand for an unauthorized unsupportable claim for a legal fee." She went on to say it raises a "multitude of troubling ethical issues," including to what extent One Beacon was aware of what transpired between Huff Wilkes and the town; One Beacon has also been delayed its tax reduction because of Huff Wilkes' actions and "in the course of making its motion, CGU's [One Beacon] counsel has implied that it [Huff Wilkes] lied..."
The Inquirer asked Jay Carlisle, an ethics professor at Pace University Law School, whether was it was ethical for a law firm to represent both buyer and seller of a property involved in a tax certiorari.
He said, "Whenever a law firm represents two parties at the same time there's a potential for conflict. The potential for conflict can be resolved if there's full disclosure and they put it in writing and if the dilemma is spelled out, then the firm can represent both [sides]. There are some things that are so egregious that even with
disclosure they shouldn't do it." Carlisle said that New York lawyers are subject to the conflicts provisions of Canon Five of the Lawyers Code of Professional Responsibility published by the state Bar Association.The Inquirer then asked, If the issue results in litigation, may the law firm ethically seek testimony from the town tax assessor [its client] to prove that the town overpaid for the property? Carlisle said, "It doesn't sound right. Whether or not the judge would let him testify is another question,. There's potential for malpractice. There are disciplinary concerns."
Carlisle believes 40-year veteran Judge Peter P. Rosato, who will rule in both cases, "is very fair and very ethical. If anyone, anywhere can determine if there were ethical violations under the New York law it would be Judge Rosato."
In a phone interview, Steve Bass said, "I take responsibility as a town board member because I didn't think of it at the time that there was a conflict of Iagallo's service as a representative of the town to acquire the building and service as tax assessor. I think the assessor has to remain at arm's length from land deals for the integrity of the process and his office and the confidence of the public."
Bass sent a memo to his fellow board members June 29 stating that the role of the tax assessor combined with that of special projects coordinator created a "serious lack of compatibility" and having the same person (Iagallo) hold both titles had the potential for "conflicts of interest." He referred to the acquisition of town hall and the controversy surrounding the certiorari proceedings, and recommended that the assessor not be
involved in any future land deals, including the sale of the old town hall. The town tax assessor should avoid "having to wear two hats," Bass wrote. He concluded, "We must immediately remove our assessor of the conflicting title of special projects coordinator by passing a resolution at our next town board meeting."Reached by phone Wednesday, Tom Sternberg, chairman of the SKCG Group who was bidding on 177 Hillside Ave. six months before the town stepped in, said his insurance company agreed to purchase the building for $5.5 million, a price One Beacon set and they agreed to pay. "We did a market evaluation. We looked at rents and mortgage rates and thought it was a fair price," said Sternberg. Part of their deal with One Beacon, one of their clients, was that SKCG would lease half the space to them after the sale for a five-year period. In a lease agreement already drawn up, One Beacon would have paid them approximately $22-$24 per square foot for about 24,000 square feet; One Beacon had been using about half the space in the building.
"We approached the town to find out what the status was of the tax certiorari," said Sternberg, when the deal was struck between SKCG and One Beacon. But the town had already caught wind about the tax certiorari and Sternberg claimed it essentially quashed his deal.
What does he think of the town's $6.9 million purchase price? "As a businessperson, that's so overpriced," he said. "We felt the market value was closer to what we were offering. We never made a counter offer. We took 70 jobs with us out of Greenburgh after 40 years there and moved to the city of White Plains."