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Owner in dispute over estate.

A major development site at the southeastern corner of 96th Street and Third Avenue could be sold in July through a bankruptcy trustee for more than $9 million.

But for Donna Sturman, whose late-parents owned the property and left it in partnership to herself and her three brothers, it is like watching her inheritance melt away.

"I never thought there could be so much injustice," said Sturman, complaining about the events of the last six years. During that time, her partnership share of her family's 28-property portfolio has been drained through an involuntary bankruptcy while presided over by Judge Prudence Carter Beatty [formerly known as Prudence Beatty Abrams].

Yet Sturman is not a debtor and the family properties were not assets pledged to what she calls fraudulent loans for $75 million from assorted banks and individuals. Her three brothers drew these unsecured loans from banks, including $30 million from Boston Safe for a Scarsdale Road property in Tuckahoe; CitiBank, Bank of New York, and Chemical Bank for "their own self-dealing."

About $23 million from Manufacturer's Hanover Trust was drawn through another corporation, Sturman charges, in order to fund margin calls. A spokesperson for the successor Chase, did not return a call by deadline.

Her brothers have been indicted for making false financial statements in connection with the loans and will be going on trial in October. Still, Sturman says she doesn't think they should be on trial, because "the financials clearly showed I was a general partner and shareholder and the banks were put on notice and knew the loans were for their personal use. They never sought my consent and there was litigation pending by me against them when the banks still aided and abetted them in obtaining this money."

Manufacturer's Hanover filed an involuntary bankruptcy proceeding against the brothers at the game time the bank was ordered to produce its loan documents by a Supreme Court judge in the action Sturman had filed.

Runaway Proceedings

Meanwhile, Sturman says while she too is a creditor, she was never notified of any creditors meetings. She says the bankruptcy creditors never voted to elect a trustee in one brother's case, although the creditors of the other brothers did vote to do so.

"The entire bankruptcy process is more than questionable and was not carried out according to its own rules," she said.

Nevertheless, Judge Beatty appointed Mark Stewart Goldberg as trustee to manage the family properties. Sturman says over the last six years, Goldberg has taken in millions in fees from the properties as well as stock from the company that had been funded by the loan. Goldberg has not returned repeated phone calls.

For example, documents show that by December 1994, Goldberg had disbursed $7,998,873 in connection with the Sturman properties. Of that, about $3 million went towards operations and the remaining, approximately $4 million, was made as disbursements for compensation to professionals - including himself and his law firm.

Sturman says because of the magnitude of the unsecured claims, the U.S. Trustee at that time, who is now a judge, Arthur Gonzalez, objected to further disbursements. But the trusteeship continues to this day and was to be renewed on July 1st.

The properties were her only source of income, and to date, Sturman has not been given a dime. Judge Beatty has never ordered any funds be dispersed to Sturman. Beatty, in fact, has never ruled on whether or not the properties even belonged to the debtors' estates, or even if Sturman is a partner as she contends.

Valuable Properties

"Attached to my proof of claim were documents for 28 properties," said Sturman. That action, filed in 1991, has never been heard nor, she says, her claims investigated.

"Goldberg treated me as if I was a debtor, and so did the court," said Sturman.

Judge Beatty's clerks have repeatedly said they are not allowed to speak to reporters, nor has the judge responded to messages.

The properties include undeveloped land on the Hudson River in Yonkers known as Mariner's Point, which Sturman says was purchased with the proceeds of the Manufacturer's loan; and a building in Mount Vernon that burned down under the trustees watch and had not been insured, she contends.

Another property at 150 Grand Street in White Plains, NY was going to be purchased by Westchester County this spring for more than its appraised value, but the deal is being reviewed by the County Board of Legislators. Sturman says the property was "abandoned by the trustee back to my brothers," and they own it outright. "I have a constructive trust interest because they used my money to buy it and it is attached to my proof of claim," she explained.

In the case of the most valuable of the properties, at 86th Street, Sturman has numerous documents proving that a partnership owned the property and that she is one of the partners. The ramshackle series of small brownstones and retail properties holds down the corner of 86th and Third and includes other properties along Third Avenue and on 85th Street.

The residential tenants are mostly gone and the retailers are small. Its value, of course, is in its development potential, and the developers have been circling the property for years.

At one time, Sturman says, Harry Macklowe wanted to buy the property.

ADD Needs ADA Power

Over the course of the six years since the involuntary bankruptcy proceeding was filed against her brothers, Sturman has suffered terrible financial hardships.

Her only income was from the properties and that has now been cut off "when I wasn't even in bankruptcy."

Sturman, a bright and cheerful woman whose life has revolved around unraveling her parents estates and her brothers' fraud for more than two decades, suffers from Attention Deficit Disorder, and has trouble focusing on one issue at a time. This story, in fact, was written by conducting daily interviews over several weeks.

Nevertheless, she has become skilled at bankruptcy law and has filed many of her objections and papers without benefit of counsel.

Her personal horror over what she is going through has been ignored in the courtroom, despite the United States law protecting Americans With Disabilities that should provide Sturman with certain consideration and accommodations.

Instead, transcripts show, Judge Beatty berated her that nothing would be done, "until and unless you stay focused on a single topic."

Another day, Judge Beatty had Sturman hauled out of court in handcuffs, and only released her after a friend called on criminal lawyer Ron Kuby.

When Sturman applied for an emergency distribution from the court in 1996, the trustee objected, writing he "never had an obligation to manage any properties in order to provide Ms. Sturman with a regular source of income."

In papers Sturman filed at the end of June of this year, objecting to the trustee continuing to operate non-debtor and estate properties, Sturman herself wrote, "I do not remember my parents, whose assets these real properties are based upon, being, nor self obligated, to provide Mr. Goldberg and his agents with a regular and lucrative source of income that they have enjoyed from these 'no asset' cases."

Parents Left Her Properties

Her father, Henry Sturman, owned properties in Connecticut, Westchester and Manhattan. When he died in July, 1973 at the age of 51, he left one-eighth to each of the children and half to her mother, Muriel, who was the executrix.

Despite numerous documents Sturman has filed, Federal Judge Beatty has never made a decision on whether or not the property is held as tenants in common, as the bankruptcy trustee contends, or by a partnership.

Before she died in 1980, Muriel began placing properties like the one on 86th Street into partnerships as part of her estate planing, specifically so the ownership would not pass to the siblings as tenants in common. Sturman says she inherited one-fourth of her mother's estate.

Lawyers Conflicted

Sturman has been through a who's who of New York bankruptcy and real estate attorneys, many of whom ended up with conflicts of interest, or she claims, did not represent her adequately, all while she paid them thousands of dollars in fees.

She still has open actions against several firms, including Milbank Tweed Hadley & McCloy, whose same bankruptcy team is under investigation in the mid-west for representing two parties without disclosing it promptly to the bankruptcy court.

A spokesperson did not respond to the REW inquiry.

Sturman says that Milbank represented Manufacturers Hanover, which made one of the original "fraudulent loans" to her brothers. After realizing they had a conflict, the attorneys did not notify her for months, and then continued to represent her in settlement talks with the bank and in the bankruptcy court.

When the bank finally filed the involuntary bankruptcy against her brothers, it effectively stayed her own action and discovery against the bank.

She continued to press her interests in the bankruptcy court, even while still represented by Milbank.

Offensive Loan Deal

She eventually met with David Edelstein and attorney Robert Levitas, formerly with Baer Marx & Upham, who are both now with Sutton East. She signed what she deems a "confusing" document that may or may not have transferred Sturman's inherited interest from her mother - but not the interest she inherited from her father - and claims against her brothers amounting to some $60 million, to "Southeast Partners" for a $30,000 loan.

Sturman says the Southeast Partners have even claimed, but never proved, that she was given $100,000, which she denies.

Levitas told REW the document transfers Sturman's interest in the property, including the portions inherited from both her mother and father, to Southeast Partners.

"In a clear and open court, she admitted it was perfectly valid," said Levitas of the agreement.

Supreme Court records show in June of 1995 Sturman commenced an action against both the law firm that represented her and Edelstein and Levitas, challenging the deal.

A hearing has been scheduled by Judge Beatty for July 24th at 2:30 p.m. on the sale of the 86th Street properties to Charles Yassky, who did not return phone calls for comment.

Of the Yassky deal, Levitas said, "We have no intention of having that transaction occur. We intend to acquire the property ourselves."

Sturman says trustee Goldberg objected to the loan arrangement at first, and charged it was a fraudulent transfer of her interests, but "then he changed his mind." In fact, Edelstein and Levitas had attempted to buy the property from the trustee, but then cut the loan deal with Sturman, something the judge herself called an attempt to get the property for less money.

On June 21, 1996 transcripts quote Judge Beatty saying of the Southeast deal, "that compromise and settlement is well below the lowest level of reasonableness... it is offensive to considerations of fair dealing which ought to govern bankruptcy sales."

An attorney familiar with the deal says Sturman will get $1 million when the property is sold, plus other monies, depending on the buyer.

In papers Sturman filed with the court pro se on June 23, 1997, requesting trustee Goldberg not be reappointed, Sturman writes: "This court can no longer overlook the inside deals, collusion and inside deals of certain creditors... The trustee and others have had at their disposal and used my assets to litigate against me and keep me under extreme hardship."

Sturman also requests the court "restore equity and integrity and deny the trustee's motion and return property that has been converted by him."

Sturman is meanwhile meeting with prospective backers and says, "I'm hoping that my property, that is not property of the debtor's estates, will be returned and justice will prevail."
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Article Details
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Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Jul 9, 1997
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