The Post-Standard (Syracuse, New York)
June 10, 2007 Sunday
‘SOME GUY NAMED ED’
WHO’S YOUR LANDLORD? STATE LOOPHOLE ALLOWS SOME TO STAY ANONYMOUS
BYLINE: By Greg Munno and John O’Brien staff writers
SECTION: NEWS; Pg. A1
LENGTH: 1940 words
Syracuse officials wanted to pressure the owner of 477 James St. to evict drug dealers from the 40-apartment complex.
The problem: Who was the owner?
Property records said the building is owned by “477 James LLC.” Who’s that? State corporation records show a Brooklyn address but no person’s name. Finally, the city turned to a state property document that requires an actual owner to sign his or her name.
It was signed, all right:
(GRAPHIC: of a scrawled signature.)
Unable to decipher the squiggle and now desperate, the city law department sent notices to the tenants in March, telling them the water would be shut off. The city hoped to flush out the name of the owner.
It worked. Someone came forward with the name: Robert Izak of Brooklyn.
Until the city’s extreme action, Izak enjoyed the anonymity afforded under the law in New York and in most of the country. Companies are free to form, buy land, support candidates and, in some cases, commit crimes without ever publicly naming the human being behind the business.
The corporate structure of choice is called a “limited liability company,” or LLC, and their numbers have exploded in recent years. The number of LLCs formed in New York in 2006 increased by 400 percent over 1997. For a $200 fee in New York, you can register an LLC that reveals nothing but a company name and address, which could be a post office box.
New York is among 14 states that don’t require LLCs to report the names of anyone connected to the companies.
Governments at every level are struggling with the conduct of faceless companies:
Criminals use the anonymity of shell companies to launder money, finance terrorists, shield assets from creditors and engage in questionable tax practices, say law enforcement agencies.
Anonymous shipping and trucking companies could allow terrorists to penetrate the U.S. border, according to U.S. senators who took testimony in November on the problem.
Businesses can skirt campaign-finance laws by setting up multiple companies, each giving the maximum allowed. Gov. Eliot Spitzer in April proposed banning campaign contributions from LLCs.
Spitzer’s concern isn’t hypothetical. The government watchdog group Common Cause New York found that a New York City investor used multiple LLCs to legally donate $600,000 to attorney general candidate Charlie King. The state limit for contributions is $5,000 for companies and $50,000 for individuals.
A front for criminals
The problem of shell companies is so severe that an international task force that fights money-laundering last year gave the United States two years to fix it or be expelled from the task force, according to the U.S. Government Accountability Office.
No state wanted to tighten its rules for fear that it would chase away business to less restrictive states, the GAO wrote.
Many companies use layers of ownership to make it harder to find the name of a person, according to FBI agent Mark Park in Syracuse. Park knew of cases in which there were seven layers of companies.
Take the case of Eli Hadad. The Miami speculator often used multiple layers of ownership as he bought 15 properties in the Syracuse area. When he sold a big parking garage on Warren Street last year, city officials publicly suspected he still held an interest. The LLC that bought the garage didn’t list any principals.
Private businesses have sprung up to incorporate companies around the world, often with promises of not disclosing owners’ names to states. One Web site called formacompanyoffshore.com , now inaccessible, enticed businesses with the assurance of “complete anonymity,” according to Senate testimony.
The landlord network
Syracuse Mayor Matt Driscoll has made cracking down on slumlords a focus of his second term.
A task force meets weekly in Corporation Counsel Rory McMahon’s office to discuss problem properties. They spend much of the time simply trying to figure out who owns what.
Tacked up around the office are lists of anonymously owned companies. Lines connect the companies on the board as the task force tries to figure out which companies and owners are linked.
The city has found cases of one person owning dozens of properties, each under a different company name.
Most are held by limited liability companies, which are attractive for tax purposes and because they reduce the financial liability for problems at one property, which protects the owner’s other assets. LLCs have been allowed in New York since 1994.
The state’s form for a new LLC leaves room for the name of a “registered agent,” or a contact person, but the state does not require one.
The LLC doesn’t have to conduct business. In 2003, the Pyramid Cos. created 25 new companies, all with “Destiny” in the name and received Empire Zone approval – just in case its Destiny USA resort is built.
City Assessor John Gamage, another member of Syracuse’s task force, said there’s a safety issue. “You’ve got something that needs to be addressed quickly – a significant health or safety concern, and you have an extremely difficult time getting in touch with a responsible party,” Gamage said.
The task force came up with the idea of creating a landlord registry that would force an LLC with rental property to disclose its owner.
The village of East Syracuse started a rental registration in December to try to hold landlords accountable for dilapidated properties. The village used to have a hard time finding a contact person for the properties, said Mayor Dan Liedka. “Without question, it was a huge problem,” Liedka said.
Such a registry is a tactic used in other communities to good effect, said Linda Margolin, chairwoman of the New York State Bar Association’s general practice section.
“The key is to force LLCs and corporations to disclose ownership whenever they need to do business with government,” she said. “That’s what banks do – they don’t loan money to anonymous interests. Instead, they say, “You want the cash, we want full disclosure.’
“Government can and should do the same thing when it comes to zoning, permits, purchasing, etc. How else would you know, for instance, if you are giving a government contract to a company that could be owned by an employee of that same government?”
There is one place in which an LLC must identify an owner.
The state’s real property transfer form, which documents a land sale, must be signed by an actual owner. But only signed – in longhand. The form doesn’t require a printed name.
Owners are free to render something that looks like they were holding the pen with their toes. Syracuse officials have dozens of examples of these worthless signatures.
So the city thought that the state should simply add a line to its form for owners to legibly print their names.
The response from Jack Conroy of the state’s Office of Real Property Services:
“The illegible signature … is typical with any hand written forms.” As for making a change, “This may trouble the legal community.” As for the city’s struggles with slumlords, “Good luck with your task force.”
So the city has resorted to the threat of a water shutoff, McMahon said.
In October, the city cut off the water at an apartment complex at 1706 Lodi St. to find the owner, he said. When the owner arrived to deal with the problem, McMahon was waiting to serve him with legal papers ordering him to fix the violations and appear in court.
“That’s the Achilles’ heel – shutting off the water,” McMahon said. “They can ignore us in housing and ignore us in codes and ignore our judgments against the LLC. But once we start shutting off the water, that’s when we start getting responses. They’re going to lose tenants.”
In the case of 477 James St., Izak said he has addressed the city concerns by evicting the tenants who were dealing drugs. As for the trouble tracking him down, he said his name is on publicly filed documents, but he wouldn’t say which.
“Well, if you’re incompetent you can’t find it,” Izak said. “But if you’re competent, then it’s posted everywhere.”
The Post-Standard was unable to find any documents listing his name, legibly. When the city tried to track down one of the addresses listed for the company, it turned out to be a post office box, McMahon said.
Even tenants in the building are unsure of who owns it.
“I think it is some guy named Ed or Wayne,” said Mary Yager, who has lived in the building for two years. “I pay my rent in cash to the manager, Liz, downstairs.”
Just then, Liz appeared. She declined to provide her last name.
“Neither Ed nor Wayne own this place,” she told Yager. “A guy named Robert (Izak’s first name) from down in the city owns it, and that’s all I know. That’s all I want to know.”
John O’Brien can be reached at email@example.com or 470-2187. Greg Munno can be reached at firstname.lastname@example.org or 470-6084.
They’re limited liability companies, widely used in the United States in the early 1990s, and declared legal in New York State in 1994. Like corporations, they protect owners from losing their personal assets in a lawsuit. But LLCs provide tax benefits over corporations. When a corporation makes money, it pays taxes, then distributes what’s left to the shareholders, who are taxed again. With an LLC, the earnings go straight to the members, and they’re taxed only once.
Source: Financial Crimes Enforcement Network.
How to track down an owner
Want to know who owns your building? Interested in telling a landlord who owns a next-door property to pick up the trash but don’t know whom to call?
Finding out who owns property can either be easy or exceptionally difficult, depending on whether the property is owned by an individual or a company, and whether that company has chosen to reveal who’s behind it.
New York doesn’t require that disclosure, and police often can’t figure out who owns a particular company or property, even in matters of life and death.
To find out what information is available on the property you’re interested in, follow these steps:
Step 1: Search the assessment database for your county.
Each county in Central New York maintains a list of properties and who owns them. By plugging in the address, you may come up with the owner’s name and address. You can also call if you don’t have Web access. The Web addresses and phone numbers are:
Cayuga County: http://co.cayuga.ny.us/realproperty/index.htm (253-1270)
Cortland County: http://www.cortland-co.org/rpts/index.html (607-753-5040)
Madison County: http://co.madison.ny.us/imateweb/search.aspx (366-2346)
Syracuse and Onondaga County: http://www.ongov.net/Realproptax/taxinfo rmation.html (448-8280; 435-2889)
Oswego County: http://co.oswego.ny.us/rpts.shtm(349-8315)
If you find that a company owns the property, go on to step 2.
Step 2: Search state records.
Go to http://appsext8.dos.state.ny.us/corp – public/corpsearch.entity – search – entry, which lists varying amounts of information on companies. Plug in the name of the entity you found when searching the county property Web site and see what comes up.
Sometimes you’ll find the name of a real person and real address. If so, bingo, you know who owns the building.
Other times, you’ll find no contact name and nothing but a post office box that may or may not be used by the actual owners. Complicating things further, you may find that the company is owned by another company that’s equally mysterious.
In these cases, finding the property owner can take hours of sifting through tax records, water bills and other tidbits of information in hopes of making a connection. That’s why the city of Syracuse and other groups want the state to change its rules to require that companies list who owns them.
GRAPHIC: PHOTO Mike Greenlar/Staff photographer Who owns this building? CITY OFFICIALS resorted to threatening to turn off the water at 477 James St. to flush out the owner – who turned out to be from Brooklyn. Most of his tenants didn’t know who he was.
David Lassman/Staff photographer RORY McMAHON,Syracuse corporation counsel, updates a board in his office at City Hall that contains clues to the identity of problem property owners. A task force meets weekly to discuss the properties and try to figure out who owns what. Lists of anonymously owned companies are tacked up around the office. GRAPHIC: The LLC explosion The number of limited liability companies created each year in New York has grown by 400 percent in the last nine years.
GRAPHIC: Scribbles and squiggles There is one place in which a private company must publicly identify one of its principals, if it buys land. The state real property transfer report, which records land sales, requires a human being to sign for the buyer. But the state doesn’t require the name to be printed. Here are examples of actual signatures from transfer reports for sales of the Syracuse properties listed. GFB Properties Inc. 416 E. Division St. Pledged Property II LLC 119 Shirley Dr 323-325 James Street LLC 125 Burnet Ave. MIGUSA LLC 120-124 Walton St. 229-237 W. Fayette St. Concord Enterprises LLC 406 Cannon St. The Post-Standard.
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