Industry reacts to Big Six lawsuit.

The real estate industry was reeling last week after learning that a civil lawsuit had been filed against Big Six manager and NYARM long-time immediate past president Richard Stone, for misappropriation of between $10 million and $20 million from the Mitchell-Lama co-op.

As of last week, no criminal charges have been filed against any of the defendants, including Stone, by the Manhattan District Attorney's office, who has been brought into the investigation. Stone did not return calls but is said to be very shaken by the allegations, which he considers unfounded.

Stone's attorney, Roger B. Adler, said "Upon review of the complaint, the charges as they relate to Mr. Stone are factually unsupported, legally erroneous and counsel will move for a dismissal of the charges."

The civil case brought under Federal Racketeering statutes has been assigned to Manhattan Federal Judge Leonard Sand but no return date has been set.

"Mr. Stone denies the [companies he set up to do work for the coop] operated fraudulently and he believes the services were provided at more competitive prices than if the coop had simply contracted out to separate retailers," Adler said.

Stone had helped years ago to develop the Mitchell-Lama's co-generation work, and efforts to increase rents by expanding an existing shopping center led to the current lawsuit.

"The coop was unwilling to adjust its maintenance schedules to keep an aging physical plant going," said Adler.

As to the fate of the money, Alder pointed to Stone's modest lifestyle. "He hardly made a fortune,' the attorney noted. "He was modestly paid, but nobody should think he supplemented his income from monies owned by the co-op. There is no pile of money, there are no exotic properties."

Indeed the family's 88th Street apartment was a rental, as was a summer home in South Hampton.

Additional funds to supplement a salary said to be about $60,000 from Big Six were earned, Adler said, from Indecom Corp., a firm owned by Stone against which the civil suit has also been filed.

"When all the facts are known, no fraudulent acts will have taken place," insisted Adler. "He is being scapegoated for the financial difficulties because the board refused to adjust maintenance. He was as creative as he could to keep the maintenance down. This lawsuit is very big on smoke. It's got a lot of conjecture, and is very deficient on facts."

Adler said the lawsuit, for Stone, has been a "very shattering experience," but he noted many prominent individuals in the real estate industry are always filing or defending lawsuits. "It's a lawsuit and there will be a dispute and it will be resolved," said Adler.

What the attorney is appalled about, he said, is that he was never given an opportunity to respond to findings on an informal basis, although he had been assured by the Big Six counsel that this would occur. "And this is what happened," said Adler, of the news media publicity.

Meanwhile Kreisel & Co. has taken over management duties at Big Six.

NYARM, the New York Association of Realty Managers, which Stone led for 15 years, has over 500 members and is the largest managers' group in the city. It even bestows a NYARM designation for completed course work in management skills. Membership is divided between vendors and property managers.

A new president, Lea Jones, had been elected only recently, after Stone lost his job at Big Six this Fall. Without a management position, Stone could no longer continue as the group's leader.

A NYARM spokesperson said the organization was shocked and saddened by the allegations being leveled at Stone. "He was a figurehead and was a great leader," she said. "He always put our guest speakers at ease." Stone had no involvement with finances for the group.

Stone was at one time was an aide to Herman Badillo. Under his politically astute and gentle leadership, NYARM expanded and thrived. The organization hosts monthly meetings that feature politicians as guest speakers and has put together annual trade shows and discussions on industry topics.

Most of the state's elite, from Mayor Rudolf Giuliani to Borough President Ruth Messinger have spoken at their Tavern on the Green meetings. Lt. Governor Betsy McCaughey is to be the guest speaker at next Wednesday's March 22nd luncheon.

It was not unusual to see Stone in knowledgeable conversation with the speakers, often politely expounding on a concern to real estate interests.

He also hosted a weekly radio broadcast on real estate issues that went from a half hour on WPAT to an hour on WEVD for $1,310. The last broadcast sponsored by NYARM was on January 10th. A spokesperson for WEVD said Stone is still on the air with other sponsors and was scheduled to host the show at 7 p.m. last Friday.

"We've talked to him this week and he'll be in," said the sales manager. Adler said he had urged Stone to continue the broadcasts.

Stone is an outspoken advocate of management licensing and had been active in campaigning for the legislation that some in the industry nevertheless feel would not weed out unethical managers. Stone was also unhappy at the still-unpassed legislation's two-years experience qualification, that he said was aimed at gathering more support for the measure. He personally believes ten years of experience is a better indication of competency.

In a newsletter to NYARM members, Stone wrote, the "new respect [from licenses] will translate into even better compensation for property managers. After all," he continued, "a better managed property will run far more economically, more than justifying and certainly offsetting increased manager fees and salaries."

Interviews conducted with many individuals last week revealed Stone had been underpaid for his work. Adler insists extra money was gleaned legally from Stone's company. "There are tax returns filed and everything," he said.

Stone began working at the 982-unit, seven building complex in Woodside, Queens, in 1969.

"That's so little!," said several real estate executives, when apprised of the salary and the number of units. It is no wonder that Stone championed management licensing and hoped it would garner managers a livable executive wage.

Big Six had been self-managed, with a tenant/cooperator board and relied on Stone for most decisions.

"He was always an example of the success of self-management," said another shocked industry member.

Leslie Kaminoff, president of the cooperative management firm AKAM Associates and a member of the NYARM board said, at large complexes while there is a benefit to self-management there is a negative side. "With one person in charge of the complex, there are no checks and balances," he noted.

Big Six's counsel Richard Fischbein advised boards they should "remember the managing agent works for them, rather than the situation here where the managing agent ran the show."

Kaminoff also denounced board members and presidents who stay on indefinitely. "That' s why there should be limited terms," he said. "So another set of eyes can come in. Even if [there is nothing] improper, is it a new set of eyes."

He also praised his competitor, Kreisel & Co., that has taken over management at Big Six. "They are an excellent company," he said.

Officials at Kreisel declined comment on the fix for Big Six.

Steven Spinola, president of the Real Estate Board of New York, was dismayed at the turn of events at Big Six. "It's hard to imagine there weren't independent audits done," he said. "It's a wonderful working class complex and to have this shadow placed over it is terrible for the people living there."

As for co-op and condo boards, Spinola advised, "You need an active group that's willing to pay attention."

The Council of New York Cooperative's executive director, Mary Ann Rothman said they are dismayed at the allegations. "A careful vigilant board that perseveres until it gets good answers can probably take care of its building," she added.

NYARM has been planning to offer a new management protocol, suggested by Kaminoff. "To maintain certification managing agents would have to be audited by an independent auditor," he explained.