Hidden deal brings co-op battle to a boil

A Press news analysis

Posted

Mention a secretive organization, and groups like the CIA, NSA or DIA often come to mind. 

But New York City and the northwest Bronx, in particular, have their own collection of tight-lipped groups, whose operations are largely concealed from the people whose interests they purport to represent. Those groups include the elected boards of directors of some of the city’s limited-equity co-ops — apartment buildings collectively owned by their tenants, with rents that are often substantially below market rates. 

And that is why when news spread last week that the board of one of the oldest co-ops in the Bronx, Park Reservoir in Van Cortlandt Village, had spent the past couple of years quietly planning a major organizational overhaul, it hit like a bombshell. 

The news leak, such as it was, came from an unlikely whistleblower — the president of Park Reservoir’s board of directors, Andrew Kimerling. 

In an open letter to cooperators dated July 8, Mr. Kimerling announced that the board was about to vote for changing the co-op’s management company. More than a mere administrative formality, the move would essentially divorce Park Reservoir from its much larger and more powerful associate — the Amalgamated Housing, the oldest limited-equity co-op in the country, and one that is credited with popularizing the co-op movement in the U.S.

“Our cooperative way of life is under attack, and I am turning to you for your assistance in maintaining what we have,” Mr. Kimerling said in his letter. 

Severing ties with the Amalgamated, Mr. Kimerling argued, would mean losing access to the co-op’s round-the-clock security service, quick-response maintenance crews — whom cooperators can summon any time of the day or night for emergency repairs — and an array of cooperatively sponsored social and athletic activities, such as lunches for seniors, children’s games or yoga classes. 

Strings attached

But this affiliation with the Amalgamated may come with strings attached: At least twice in recent years, the Amalgamated threatened to cut off Park Reservoir’s access to maintenance services after the smaller co-op tried to challenge its big brother’s decisions, Park Reservoir’s board member Steve Zitrin told the Monday night meeting. 

Proponents of hiring a separate management company —comprising a vast majority of Mr. Kimerling’s fellow board members — argue that the move would enable Park Reservoir cooperators to gain control over maintenance and renovation work at their buildings, instead of being outvoted by Amalgamated Housing representatives, and would cut the annual cost of running the co-op by at least $200,000. 

They also accuse Mr. Kimerling of breaking the co-op’s rules by going public with the management change plan before it has been finalized and put into effect. 

Vote scheduled

The Park Reservoir board of directors was scheduled to vote Tuesday night on hiring a new management company — Bronx-based Midas Property Management, headquartered at 3605 Sedgwick Avenue in Van Cortlandt Village. 

Among Park Reservoir’s 12 board members, only two of Mr. Kimerling’s fellow panelists share his opposition to the plan, he estimated in an interview with The Press. 

Faced with an imminent defeat, Mr. Kimerling called for an emergency meeting of cooperators, which convened Friday night in the lobby of one of the co-op’s buildings, located at 3915 Orloff Ave. and known internally as Building 4. Residents of the co-op’s Building 3 followed suit with a similar meeting on Monday. 

Under Park Reservoir’s by-laws, such improvised meetings have no binding power. Instead, the meeting was a last-ditch bid by Mr. Kimerling and his allies to rally public support for their dissent, to pressure the board into postponing the vote and to submit the management change plan for discussion at a general meeting of cooperators. 

A number of other board members showed up at the emergency meeting, and did little to conceal their displeasure at the dissent in their ranks — a revolt led by none other than the board president.

The board had been planning to announce the co-op’s management change and present the new managers to cooperators at a general meeting this fall, board member Susan Braunstein, one of the plan’s leading advocates, told The Press. The board had been interviewing management candidates for the past couple of years, she said. 

No obligation

“At this point, we were not obligated to tell the stockholders anything,” she said. “But we were nice enough to book some place for September to lay out and let them meet the new managing agent.” 

She offered a harsh rebuke to a cooperator who sought answers about the board’s plans: “That’s not his place to know,” Ms. Braunstein said. She also charged that Mr. Kimerling had no business notifying cooperators of the plan ahead of time, and accused him of breaking the co-op’s regulations by doing so. 

Ms. Braunstein and her allies base their stance on a section of Park Reservoir’s by-laws – a paragraph that reads: “The board of directors shall have entire charge of the property, interests, business and transactions for the conduct of its meetings, and management of the corporation as it may deem proper.” 

Closed meetings

Board meetings are generally closed to cooperators, who are often notified of any major decisions – such as large-scale renovations or taking out millions of dollars in loans – after the plans have already been approved by the board and put into effect. 

Park Reservoir’s board of directors is elected from among cooperators, and while the board is the co-op’s ultimate authority on major business decisions, it hires outside managers to handle financial affairs and budgets. The intricacies of the co-op’s finances often elude board members, many of these elected representatives concede. 

“The budget is very hard to understand,” Ms. Braunstein told The Press. At a recent meeting, “we had a board member from the Amalgamated sitting with us, we were talking about budgets, and what she ended up saying was: ‘Gee, I’m glad you are having problems deciphering the budget. So are we.’” 

And therein, according to critics, lies the problem. 

Board members’ acknowledged bewilderment over the intricacies of the budget opens the way for fraudulent deals by skilled hired managers. The current general manager of both Amalgamated Housing and Park Reservoir, Charles Zsebedics, had pleaded guilty to third-degree grand larceny in 2000 for his role in defrauding cooperators at his previous place of employment, Park City Apartments co-op in Queens, of $1.3 million. 

Nevertheless, the Amalgamated and Park Reservoir hired him as general manager when he applied for the job in 2011. The co-ops’ boards proclaimed him the most qualified of all candidates. 

Although the hiring process may have appeared smooth on the surface, what went on behind the scenes was more turbulent, according to board members. 

The Park Reservoir board had initially objected to hiring Zsebedics, but caved in after the Amalgamated threatened to cut off the smaller co-op’s access to maintenance services, Mr. Kimerling told The Press. He maintained, however, that the threat was “empty” — since the co-ops would have had 90 days to formally dissolve their relationship — and said the Park Reservoir board has since grown to appreciate Mr. Zsebedics’ qualifications for the job. 

During Zsebedics’s tenure in Van Cortlandt Village, the two co-ops carried out major renovations, replacing apartment balconies at Park Reservoir and parts of brick walls at the Amalgamated — and taking out more than $30 million in loans to finance the work. 

Rocketing rents

As a result of these and other projects, rents at Park Reservoir have increased on average by more than 35 percent over the past four years, according to the co-op’s financial reports. And while rents at Park Reservoir remain below market rates, some cooperators wonder whether the expense was justified — and complain about a lack of transparency in the board’s work. 

Unlike the CIA or other federal agencies with alphabet soups for names, co-op boards of directors cannot claim they are dealing with sensitive security issues as the reason for their secretiveness. Instead, they base their method of operation on their co-ops’ by-laws. Many of those regulations date back decades, having been designed to serve small, close-knit communities of early cooperators, where everyone knew their neighbors, and most members placed full trust in their leaders. 

Amalgamated Housing, on whose rules and practices Park Reservoir’s regulations are closely modeled, was founded in 1927 by a group of textile factory workers and their families. Mostly Jewish immigrants from Central and Eastern Europe, the workers wanted to escape their squalid tenements on Manhattan’s Lower East Side. They settled on the rolling hills of the northwest Bronx as the place to build their new homes, and constructed brick apartment buildings with large windows, facing Van Cortlandt Park and letting in plenty of natural light and air. 

In the decades that followed, new buildings were added and Amalgamated Housing expanded to its current 1,500 or so apartments from the initial 300. Newcomers arrive from all over the city, and work all over the Tri-State Area. Staying in touch with all of one’s neighbors – or even with board members and board candidates – has long ceased to be a realistic option. 

The sister co-op, Park Reservoir, was founded in 1957, becoming the first Mitchell-Lama co-op in New York. The Mitchell-Lama program provides affordable housing for low to middle-income residents. Park Reservoir currently has about 275 apartments, shares management, security and maintenance teams with the Amalgamated, but elects its own board of directors. 

Elections are held both at cooperators’ general meetings and by mail, each apartment gets one vote, and only co-op members are allowed to run. 

Tenant apathy

But general meetings often draw just a few dozen tenants — with board candidates, current board members, and their families comprising a large share of the gathering. Many cooperators fill out their ballots after giving no more than a cursory glance to candidates’ campaign statements, while others do not bother to vote at all. 

It was amid this troubled background that the emergency meeting called by Mr. Kimerling on Friday took place. 

Some 75 people crammed into the Orloff Avenue building’s lobby Friday, and the warm night air wafting through wide-open doors did little to cool off the tightly packed space or the flaring tempers. Droplets of sweat trickled down brows, shouted interruptions turned increasingly loud and impatient. 

“I read what Andy [Kimerling] wrote, I’m insulted by it,” Ms. Braunstein told the gathering, as she advocated the board’s power to make managerial decisions without consulting cooperators, and called for seceding from Amalgamated Housing and its management team. 

“We are being killed financially,” she said. 

Both the majority team and the dissent team on the board was apparently to argue their respective cases, with the hope of swaying cooperators to their side. But if that was the plan, it did not play out quite as the sides expected. 

Too soon to decide?

The question of whether or not to change the management team should not even be on the agenda yet, cooperator Josif Zhitnitskiy, a physics professor at the City University of New York (CUNY), told the gathering as he took the floor. 

“The main issue here is that we do not have enough information to make a decision,” he said. “We are always in the dark. The first step, since we are having this meeting, is to change the by-laws and make [the board’s work] transparent to the people.” 

Board members were trying to prod cooperators “like lambs” toward approving a plan the board had designed behind closed doors, Mr. Zhitnitskiy said. He urged cooperators to demand full access to information that would allow tenants to make their own informed choices. 

Mr. Zhitnitskiy’s remarks drew several rounds of applause from the audience – and a show of frustration from several board members. 

“We are not going to make a decision, we are not going to do anything,” board member Susan Crenshaw fumed. 

“It’s very hot in here, OK? We are bickering, we’re yelling – I’m outta here. I can’t even think,” she told the gathering angrily, before stomping out the door. 

A number of cooperators interviewed by The Press expressed frustration with their co-op’s by-laws that apparently allow the board to rule at will. Yet this power may be more fragile than it seems, according to another clause in the by-laws. 

The clause, apparently unknown to many cooperators, states that a meeting of cooperators may amend or repeal the by-laws – and may restrict the board’s power to challenge those changes. 

Editor’s Note: the author is a member of Amalgamated Housing co-op.

Comments

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Bernice C

Standing ovation to Mr. Kimerling for fighting for his community/residence and against the board. Great article.

Thursday, July 14, 2016 | Report this
GBD10463

Since the Mitchell-Lama program is a NY State creation, is seems strange that the co-op board is not subject to open meeting or sunshine laws.

Is it possible that its bylaws are outdated, and should comply with any relevant transparency laws? There is a lot of money at stake, not to mention peoples' homes.

Running a co-op board properly is not for the fainthearted. A NY Times article from 2014, regarding a necessary $30 million renovation of the entire brick façade of Two Fifth Avenue, shows how fraught the process can be. But equally important as good management and a transparent board, is a tenant ownership that takes an active interest in its property. (See http://www.nytimes.com/2014/06/15/realestate/village-co-op-gets-hit-with-30-million-assessment.html?_r=0).

Read the Times article. You will see that a change of board members is not unusual when troubling circumstances arise. Who is ready to step up?

Thursday, July 14, 2016 | Report this
MGrobien

I don't blame Park Reservoir for, metaphorically speaking, running as far away as possible from the Amalgamated Housing Corp. Living at the AHC is akin to dying a slow, painful death. As the article states, a person convicted of housing fraud was installed as the general manager, and since then the AHC has assumed an exorbitant mortgage, raised carrying charges astronomically, cheaply glamorized a couple of buildings, and embarked on dubious restorations. Yet one must also consider the megalomaniacal long-term board directors, thug-like managers, and zombied-out residents. Plus, one might assume that certain political and judicial entities have a hand in the pie, too. I, for one, would have left years ago, but the NYC housing market has made relocating impossible. Therefore, I must try to keep my spirits up even though the AHC noose is cinched firmly around my neck. Until then, I wish the absolute worst for the long-term AHC board members, the overpaid managers and their freeloading brood, any complicit residents, and any enabling political, judicial, and legal entities—because they have made life hell for those who seek to live honestly and peacefully.

Saturday, July 16, 2016 | Report this
MGrobien

And let it be stated for the record here that a few years ago, when Park Reservoir was talking about privatizing, Andrew Kimmerling's name was illegally attached to more than one apartment at that co-op, according to City records. Meanwhile, one of those apartments in question had been legally occupied by the rightful shareholder for decades, as it still is.

Park Reservoir board members rely on hubris and temper tantrums to intimidate shareholders and conceal the fact that Park Reservoir does not have its paperwork in order and is a fraudulent entity. People, you have been deceived and robbed for years, and rather than save $200,000 a year by severing ties with the AHC, the City and State will probably send you multimillion-dollar bills for years of unpaid taxes. Well, whether you stay or leave, you'll get those tax bills sooner or later.

Same goes for shareholders at the Amalgamated, who are also farmed like mushrooms. You know, "Keep them in the dark and feed them sh*t." The Amalgamated Housing Corp. and Park Reservoir are Bernie Madoff–like cons.

Sunday, July 17, 2016 | Report this