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Source: US State of New York

AG James and Comptroller Stringer Secure Nearly $3 Million from Landlords for Underpaying Workers and Fraudulently Obtaining Tax Breaks

Settlement Includes Back Wages for Workers and Damages for City and State 

NEW YORK – New York Attorney General Letitia James and New York City Comptroller Scott Stringer today announced a settlement totaling almost $3 million with the developers and landlords of a luxury apartment building in Downtown Brooklyn for failing to follow prevailing wage requirements under New York State law. Mica Gabe Brooklyn LLC (Mica Gabe) and Brooklyn Warehouse 180 LLC (Brooklyn Warehouse) — the owners of 180 Nassau Street in Brooklyn — will pay nearly $415,000 in back wages and interest to their building service employees and approximately $2.5 million in damages to the city and state for fraudulently obtaining a tax break under New York’s “Section 421-a” program, while failing to simultaneously follow the program’s prevailing wage requirement. Whistleblower 32BJ SEIU will receive a portion of the damages as a reward for notifying the state of the violations.

“Swindling workers out of their hard-earned wages will never go unanswered by my office,” said Attorney General James. “Not only did these landlords fraudulently enrich themselves and steal from taxpayers, but did so while underpaying their workers. We are holding these defendants accountable and will continue to protect workers’ rights by making sure that developers and landlords who receive these specific tax incentives live up to their end of the bargain by paying workers what they’re owed.”

“An honest day’s work deserves an honest day’s pay, and across the city, our investigations have found employers who are receiving property tax exemptions without holding up their end of the bargain for their employees,” said Comptroller Stringer. “I am proud of the collaborative effort in this case between my Bureau of Labor Law and the Attorney General’s office, which allowed us to recover these wages and put them back where they belong — in the hands of working New Yorkers to provide for their families.”

“This is a huge victory, not only for the hardworking men and women who have kept Brooklyn Warehouse clean, safe, and functioning for tenants, but also for the families and communities that rely on them,” added Kyle Bragg, president of 32BJ SEIU, the largest property service union in the country. “Attorney General Tish James, Bill Hurlock, and the entire legal team at Muller Law should be thanked for working tirelessly to uphold New York State law on behalf of working people. When buildings receive tax abatements in our city, there is a basic expectation that they will follow the law and respect their workers’ rights. We hope this settlement serves as a warning to others in our city who would look to cut costs by undercutting workers.”

Section 421-a of the New York Real Property Tax Law grants tax breaks on certain new multi-family buildings. To qualify, Section 421-a requires that any project receiving the tax exemption be subject to local rent stabilization laws and — where projects contain more than 50 units — requires developers of the project to either pay building service employees prevailing wages or set aside a number of affordable housing units. 

A joint investigation conducted by the Office of the New York Attorney General and the Office of the New York City Comptroller revealed that, in 2014, defendant Mica Gabe fraudulently induced the New York City Department of Housing Preservation and Development (HPD) to issue a Section 421-a partial tax exemption for the Brooklyn property, based on Mica Gabe’s false assurance that building service employees would be paid prevailing wages, but the two defendants failed to pay the applicable wages to employees between August 2014 and March 2016. In fact, less than two weeks after certifying to HPD that they would pay the building service employees prevailing wages, Mica Gabe began hiring doormen, porters, and a superintendent for the 180 Nassau Street property and paying them wages lower than required by law.

Specifically, Mica Gabe:

  • Paid newly-hired doormen a wage of $12 per hour, rather than the applicable prevailing wage of $17.58 per hour;
  • Paid a newly-hired superintendent a wage of $17.50 per hour, rather than the applicable prevailing wage of $24.26 per hour; and
  • Continued to underpay building service employees and failed to provide them supplemental benefits until March 2016.

“We will not stand idle as owners receiving tax benefits flout the law and cheat hard working New Yorkers out of their wages,” said HPD Commissioner Louise Carroll. “HPD is proud to work with the Attorney General and partners to ensure that owners comply with 421-a rules and will continue to use all the enforcement tools at our disposal to hold bad actors accountable.”

For their violations of Section 421-a and the New York False Claims Act, the two defendants will pay the full back wages to workers, along with 16-percent interest, in addition to over $2.5 million in damages to the city and state. Union 32BJ SEIU, the whistleblower that came forward to report the fraud, will also receive a percentage of the damages to be paid.

In connection with today’s settlement, the defendants admitted to violating the New York False Claims Act, as well as a willful violation of the Section 421-a prevailing wage regulations. In addition, Brooklyn Warehouse is required to ensure that the prevailing wage regulations are followed in the future by providing the Office of the Attorney General with annual wage reports, and must show that any subsequent purchaser has agreed to comply with the prevailing wage requirements of Section 421-a.

The 10-story luxury apartment building at 180 Nassau Street in Downtown Brooklyn includes 103 luxury rental units with a 24-hour concierge-attended lobby, as well as a superintendent, doormen, porters, and other building service employees who service and maintain the property.

The Office of the New York Attorney General wishes to thank the Office of the New York City Comptroller, the New York City Department of Housing Preservation and Development, and Corporation Counsel for their valuable assistance in this investigation. The investigation began after local union 32BJ SEIU notified the Attorney General Office of the underpayment of wages and fraudulent inducement of Section 421-a tax exemptions, filing a suit under the New York False Claims Act.

The Attorney General’s investigation was led by Assistant Attorney General David Farber of the Taxpayer Protection Bureau, with the assistance of senior legal support analyst Bianca LaVeglia. The Taxpayer Protection Bureau is led by Bureau Chief Thomas Teige Carroll and Deputy Bureau Chief Scott Spiegelman. The Bureau is a unit of the Economic Justice Division, which is led by Chief Deputy Attorney General for Economic Justice Christopher D’Angelo.

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