Categories for Eichner

MAJOR NEWS: New York Attorney General Settles Case Against Manhattan Club and Promises $6.5 Million Restitution to Owners

AUGUST 16, 2017 — MANHATTAN.  After more than three years of investigation and litigation, the New York Attorney General’s Office today announced the settlement of the Big Apple’s most notorious timeshare case.

The AG announced that hundreds of owners at The Manhattan Club will share in a $6.5 million settlement approved by the long-troubled operators of the swank timeshare near Central Park.  While details of the settlement are still to emerge, it is clear that this is not only a victory for the AG, but for thousands of TMC owners who paid top dollar for timeshares that, over time, they could not easily use.  As part of the settlement, the operators of TMC agreed to sell the club to a new company that, presumably, will restore some order and confidence for club members.  RedWeek talked to attorneys who represent owners and will share their comments as more details emerge.  For the meantime, please see the complete announcement from the AG’s office.

A.G. Schneiderman Announces $6.5 Million Settlement With Midtown Manhattan Timeshare That Scammed Purchasers

The Manhattan Club, Timeshare In Midtown Manhattan, Will Pay Restitution To Hundreds Of Purchasers That Were Misled About Their Ability To Reserve Rooms And Resell Shares
Settlement Is The Largest In Recent History Of The AG’s Real Estate Finance Bureau
Schneiderman Reminds New York Residents To Be Wary Of High-Pressure Sales Traps Utilized By Some Timeshare Companies
NEW YORK – Attorney General Eric T. Schneiderman today announced a $6.5 million settlemnt with the owners and operators of the Manhattan Club, a timeshare building in Midtown Manhattan, over the sponsor’s repeated false promises to potential and current share owners.
The settlement is the largest in recent history for the Attorney General’s Real Estate Finance Bureau. Under the terms of the settlement, the operators of the Manhattan Club, at 200 West 56th Street, acknowledge that they repeatedly misled shareowners about the club’s reservation process, their ability to sell back their shares, and the details of the club’s state-approved offering plan.
“The owners of the Manhattan Club lured thousands of timeshare buyers with false promises and shady sales tactics that violated New York law,” said Attorney General Schneiderman. “While timeshares can be legitimate enterprises, scams like this one are common. To avoid becoming a victim, always be wary of high pressure sales tactics.”
The club bills itself as a “unique” “residence-style boutique hotel” that blends “a vacation ownership retreat with a luxury suite hotel” and that offers “a hard-to-find haven in the midst of this active city.” The website appeals to people who “frequently visit New York City to enjoy Broadway theatre, fine dining and shopping, [and] classical performances.”
The owners and operators in this case are T. Park Central LLC, O. Park Central LLC, Park Central Management, LLC, Ian Bruce Eichner, Leslie H. Eichner, Stuart P. Eichner, Scott L. Lager, Hospitality Advisors, LLC, New York Urban Ownership Management, LLC, and Manhattan Club Marketing Group LLC.
In addition to the $6.5 million restitution to eligible timeshare owners, the settlement requires:
  • The owners and operators to be barred from the timeshare industry
  • The owners and operators will sell their stakes to a third-party purchaser and relinquish management control
  • Remove all sponsor-appointed current officers and directors from their positions as members of the Board of the Timeshare Association.
Eligible timeshare owners will be contacted by a Claims Administrator at a later date about disbursement of the restitution.
The Office of the Attorney General (OAG) began investigating the Manhattan Club in 2014 after receiving repeated complaints from shareowners who paid tens of thousands of dollars to become Manhattan Club “owners,” but were unable to make reservations due to a claimed lack of available rooms by the hotel’s operators. At the same time, rooms in the Manhattan Club were being rented over the internet to the general public, in violation of the timeshare’s offering plan.
In Spring 2014, OAG sent undercover investigators to record the Manhattan Club’s “Vacation Ownership Experience” sales presentation. Investigators found evidence indicating that the Manhattan Club’s sales tactics amounted to a bait-and-switch scheme.
Prospective purchasers were baited by a relentless sales pitch that included a number of misleading promises, including that ownership in the Manhattan Club is “better than money in the bank.” Prospective buyers were also told that the club does not rent rooms to the general public, that reservations were easy to make, and that few restrictions apply to reservations by owners.
But these promises were false. For example, contrary to the club’s explicit promises in its offering plan, room availability to owners was greatly limited because rooms were being rented out to the general public. That means that all reservations are subject to availability and owners, in some cases, were unable to use any of the time they purchased. Further, the owners’ annual common charges jumped approximately 200% in the last ten years – to about $2,000 per ownership interest per year for the smaller units – on top of the upfront purchase costs that ranged from just under $10,000 to over $40,000 per ownership interest. Some frustrated owners have sold their ownership interests back for a mere $1, just to escape the burdens of paying these charges.
In July 2014, pursuant to General Business Law section 354, a provision of New York’s Martin Act that confers broad powers on the Attorney General to investigate and halt fraud, a Manhattan Supreme Court justice barred the Manhattan Club from selling timeshare interests, preventing them from withdrawing money from certain bank accounts, and stopping them from foreclosing on Manhattan Club purchasers during the pendency of the investigation.
For information about how to protect yourself from timeshare, home improvement and vacation scams, click here for the Attorney General’s brochure “Don’t Get Burned: Attorney General’s Guide To Protecting New Yorkers From Summer Scams.”
This case was handled by Louis M. Solomon, Chief of Enforcement in the Real Estate Finance Bureau, with assistance from Assistant Attorneys General Nicholas Minella and Kimberly Ver Ploeg in the Real Estate Finance Bureau, as well as Matthew Woodruff, Senior Enforcement Counsel, Assistant Attorney General Tanya Trakht, and paralegals Natalya Fadeyeva and Pascual Noble in the Investor Protection Bureau with notable contribution by Jonathan Werberg, Senior Data Scientist, Research & Analytics. This case was investigated by former Supervising Investigators Luis Carter and Michael Ward, Supervising Investigator Sylvia Rivera, Investigators Karon Richardson, Elsa Rojas and Former Sr. Investigator Richard Friedman, under the direction of Deputy Chief John McManus and Chief Dominick Zarrella of the Investigations Bureau. Former Assistant Attorneys General Serwat Farooq and Elissa Rossi also assisted on the case. The Real Estate Finance Bureau is led by Bureau Chief Brent Meltzer and overseen by Executive Deputy Attorney General for Economic Justice Manisha M. Sheth.

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Manhattan Club Case Approaches One-Year Anniversary with No End in Sight

Manhattan Club ongoing legal troubles

The Developers Fight Back: Seek a Court Hearing June 22 to Partially Lift Injunction and Dismiss Eichners from Case, Claiming that Investigation by New York Attorney General has “Essentially Destroyed” Timeshare Business 

By Jeff Weir, Chief Correspondent for RedWeek.com

MANHATTAN — If you like heavyweight fights, shootouts in old Westerns, or bare-knuckle courtroom dramas, you should covet this upcoming showdown in the Big Apple.

And if you are a timeshare owner at The Manhattan Club, this is what you’ve been waiting for.

After laying low and saying nothing of substance for many months, the embattled developers of the Manhattan Club are fighting back, with a vengeance, against New York Attorney General Eric Schneiderman’s highly publicized investigation of alleged fraud and misrepresentation in timeshare sales at the mid-town resort.  The primary target of the inquiry, New York developer Ian Bruce Eichner and his wife, Leslie, and brother, Stuart, now claim in court papers that they are victims of an “overbroad” and overlong investigation that has “caused severe financial and reputational harm.” That’s a lawyerly way of saying the case has already cost them millions and damaged their
reputations.

“The Attorney General’s investigation ad infinitum has become an investigation ad absurdum,” said Gerald Shargel, the Eichners’ lead attorney, in a new court filing.  During an interview with RedWeek over the weekend, the soft-spoken but defiant Shargel added: “There comes a time when this has to stop.  If they have a case against the Eichners, file it, and you can count on the fact that we will defend it.”

In a blistering blizzard of motions and memoranda filed since May 28, Shargel is petitioning the New York Supreme Court to jettison parts of the July 29, 2014 injunction that shut down the club’s $400 million timeshare business and threw thousands of owners into limbo and turmoil.  The court order also froze the club’s assets and blocked foreclosures, which pinched the club’s operating capital.  A hearing on the motions and arguments is scheduled for June 22. But given the history of the case,
postponements are possible.

Eichner’s legal team is making four basic requests, including one that will probably make many Manhattan Club owners cringe.  First, they want a judge to dismiss the Eichners from the case on grounds they committed no personal wrongdoing.  Second, they want to lift the ban on sales for 21 buyers (out of 64) whose purchases were halted by last July’s court order.  Third, they want an Aug. 1, 2015 cut-off date for further discovery and depositions (legal Q and A interviews conducted under oath).  Finally, Eichner’s attorneys are asking the court to prohibit the AG from sending “mass mailings” to Manhattan Club owners (for a survey about their experiences at the club).

“The Attorney General’s investigation…and the related preliminary injunction have essentially destroyed the Manhattan Club’s ability to operate as a viable business.  They have forced the termination of 90 of 93 employees and independent contractors (97 percent of the staff) and have pushed one of New York City’s premier timeshare organizations into an almost-insurmountable financial deficit,” Eichner’s motion stated.

It did not take long for the AG’s office to respond in kind.  “Although the investigation is ongoing, to-date we have found evidence indicating a widespread pattern of wrongdoing including but not limited to sales misrepresentations, numerous practices that violate the terms of the Manhattan Club’s statutorily-required offering plan, the failure to properly register as broker-dealers of securities, and the misclassification of employees.” This summary of the investigation comes from one of New York’s top timeshare regulators, Andrew H. Meier, deputy bureau chief for the AG’s Real Estate Finance Bureau, in a June 5 letter to Justice Jeffrey K. Oing.

The outcome of this slugfest will impact the vacations, and pocketbooks, of thousands of Manhattan Club timeshare owners.  Maybe a political career or two, as well, since Schneiderman, a Democrat, is frequently mentioned in the media as a likely candidate to challenge Gov. Mario Cuomo in 2018.

Welcome to the OK Corral of Timeshare Legal Disputes

The Manhattan Club case is a painful example of things gone wrong in the timeshare industry, which relies on high-pressure sales tactics, including first-day discounts, incentives and gifts (shows and meals) to persuade customers to buy weeks or points in vacation clubs. In this case, however, the overall buyer experience soured when hundreds of owners started complaining publicly, including in RedWeek.com forums, that they could not get reservations to use their high-value timeshares. Instead, they discovered that many intervals were simultaneously available for rent online to non-
owners — and at prices that were LOWER than their annual maintenance fees, which
average $2,000 or more per unit.

Schneiderman’s office started investigating the club two years ago — cautiously at first, aggressively in the last year — after receiving more than 100 formal complaints from owners who said, in effect, that they had been defrauded and/or duped into buying expensive timeshares they could not use.

By July 2014, Schneiderman’s team had collected enough potential evidence, including undercover video-taped transcripts of wildly misleading sales presentations at the club, to secure a court order that shuttered the timeshare operation, immediately, while the AG continued investigating the club’s sales practices, rental policies and public offering statements.

Now, 11 months later, the investigation has turned into a tortured legal battle pitting some of the smartest lawyers in Manhattan against each other.  Eichner’s legal team specializes in white collar criminal defense and negotiating complicated business litigation.  Schneiderman’s team, representing New York taxpayers, appears to have unlimited resources to pursue the Eichners, indefinitely.  If someone made a TV crime drama out it, they’d call it “CSI: Manhattan.”

Like most TV and real-life dramas, the Manhattan Club investigation is all about following the money.  Disgruntled owners want their purchase money back; the AG’s Office wants to find out where the club’s money is, or went; and the Eichners want to lift an injunction that, for now, prevents the club from using its bank accounts.

In an odd twist — again, perfect for a reality TV script — the Eichners claim to be the injured parties of an overzealous investigation from the AG that should never have been approved by a New York judge on July 29, 2014.  Their court pleadings are silent, however, on the underlying question — who are the real victims in this case?

Straight from the Court Files: the Eichners Plead Their Case

Here are excerpts from the Eichners’ pleadings, drafted and filed by Shargel’s team, as they seek to overturn big chunks of the 11-month-old injunction.  Some of the excerpts merit an introduction.  Others speak for themselves.

  • “There was no proper basis for a preliminary injunction.  There was no allegation that the three Eichner respondents personally engaged in any wrongful conduct.”
  • “The Attorney General has had ample time to investigate Ian Bruce Eichner, Leslie H. Eichner, Stuart P. Eichner and Urban (the company that manages the Manhattan Club’s HOA) after the order was issued.  Yet no further action has been taken.  Rather, a preliminary injunction remains in place, and the business interests and personal and professional reputations of these respondents continue to (unjustly) suffer.

    “Urban” is legal shorthand for New York Urban Ownership Management LLC, which is majority owned by Ian and Leslie Eichner.  The company has managed all aspects of the Manhattan Club since its inception.

  • “The Attorney General’s primary allegations relate to a single group of salespeople at the Manhattan Club. Each of the alleged misrepresentations was made by one sales representative and the sales team he supervised.  There is no allegation that this alleged course of conduct went beyond that sales team.” (The sales person is named in the Eichner pleadings — which are public documents — but RedWeek sees no public benefit in publishing the man’ name.)

    “There is not one drop of evidence, or proof, to suggest the Eichners had any knowledge of that (sales) conduct,” Shargel added, when questioned by RedWeek.  “You cannot blame the general for the unsupportable conduct of privates that are engaged in conduct not known to the general.”

  • Sixty-four timeshare purchases were under contract but not finalized when the AG’s court order terminated all timeshare sales at the club last summer. Forty-three subsequently rescinded their contracts. Purchase deposits from the remaining 21, ($423,793 – an average of $20,180 per timeshare) were put into an escrow account. These owners, while aware and informed of the AG’s investigation, have chosen to keep their Manhattan Club timeshares. As a result, the Eichners are asking the court to allow those sales to proceed. Just as important, they also want permission to use the money from those sales, including deposits and maintenance fees, to fund ongoing operations at the club (including, presumably, the legal fees for this case).
  • The Eichner pleadings about discovery limits and mass mailings are straightforward but strange.  They’re also related. “On May 19, 2015, the Attorney General demonstrated that the reasonable and productive lifespan of its investigation has reached an end.   On that date, the Attorney General caused a mass-mailing email to be sent to hundreds of current and former Manhattan Club timeshare owners from a company named ‘SurveyMonkey.’ The email contained a link to a customer satisfaction survey with 36 suggestive questions clearly intended to provoke after-the-fact complaints from owners.”
  • “The Attorney General’s reliance on ‘SurveyMonkey’ to build a case that has already consumed nearly a year demonstrates that this case will clearly drag on into the indefinite future and beyond any reasonable bounds…Many of the questions, taken together, were structured to suggest that a recipient may have been the victim of fraudulent sales practices by the Manhattan Club…This is not an appropriate or effective method for New York State’s highest law enforcement agency to gather information.  We intend to move at an appropriate time (if necessary) to exclude the results of the Attorney General’s SurveyMonkey and any leads generated by the survey.”

    Shargel, in his interview with RedWeek, said the AG’s questionnaire to owners is full of leading questions that would not stand up in court.  “They are just flailing around trying to make a case out of no case,” he said.

  • In addition to challenging the AG’s communications with owners — many of whom had voiced frustrations, for months, about their inability to get direct information from the AG about the investigation — Eichner’s legal papers shed light on the raging financial successes of the Club’s timeshare operation.
  • “Before the order was issued in this case, the Manhattan Club and the Timeshare Association had enjoyed 17 years of success.  Between 1997 and 2014, the Manhattan Club realized a sales total of approximately $400,000,000…Since the order was issued…lost revenue opportunities are estimated in the tens of millions of dollars.”

The AG’s Not Talking, But Others Are, Including Owner Advocates

Representatives from the Attorney General’s Office declined to talk about the case, choosing, instead, to let their own voluminous court filings speak for themselves. Other interested parties, however, are not so reticent.  Owner forums on RedWeek.com and other online discussion groups are on fire with generally hostile commentaries about the club’s owner services and reservation problems, the Eichners, escalating maintenance fees and, in some cases, the AG’s office (over the pace of the inquiry).

Douglas F. Wasser, a New York attorney hired by a group of Manhattan Club owners to work directly with the AG’s office, scoffed at the Eichners’ attempt to get themselves out of the case.

“I can’t imagine that the court will take this seriously,” Wasser said.  “The subjects of an investigation by the New York Attorney General should not get to dictate the scope, length and people subject to the investigation. The law doesn’t work that way.”

Warming up to the subject, Wasser added: “Eichner’s attoneys may brag in their memo of law that over $400 million in TMC units have been sold to the public between 1997 and 2014. But we simply view that assertion as an admission that $400 million in publicly owned equity has been wiped out by TMC operations.  What purpose does the New York Attorney General serve but to police against such a grievous public harm?

“The sheer number of TMC owners who, prior to the New York Attorney General’s current proceeding, tried to simply surrender their units to TMC for little or no money begs the question as to the current value of TMC units,”  Wasser said.

Greg Crist, CEO of the National Timeshare Owners Association, has monitored the case for many months, and written about it in trade publications.  While aware of the details of the investigation, he’d rather focus on its significance for owners and the overall industry.

“I don’t want to see another Manhattan Club scenario anywhere,” said Crist. “This case is quite unusual, but it does not bode well for the good operators in the industry, ecause it disturbs consumer confidence about the industry’s sales practices. Fortunately, there’s no real pattern to this kind of activity.”

Shargel, for now, gets the last word.

“We look forward to a hearing,” Shargel said. “The discovery is substantially complete. We have no more to give them.  The Eichners did not engage in any acts of wrongdoing. There is no case against the Eichners.  If they (the AG) think the resolution here is to bring a complaint, then bring it.  But I am frustrated, because this should come to an end.  At some point, this has to end.”

One thing is certain.  Barring a miraculous change in strategy and tactics, the case will go on.  Beyond the June 22nd court hearing, both sides have already agreed to participate in another private status conference on July 10.  So it goes.


Interested in following this case? Visit RedWeek.com for much more information on the Manhattan Club investigation and how you can get involved.

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RedWeek Reaches Out to Manhattan Club Owners

If you follow news in the timeshare industry, there’s little doubt that you’ve heard of the Manhattan Club lawsuit. The case came to life in 2011, the crux of issue being that owners were unable to book reservations despite their ownership status. Banded together in a class-action lawsuit, owners alleges that the New York City-based timeshare deliberately oversold ownership and then went on to rent the remaining indeustry to travelers through its rental program. The Manhattan Club denies the accusations, holding that the risks of ownership were disclosed and it’s clearly stated that owners might not be able to obtain the weeks they want. Additionally, The Manhattan Club states their rental program is beneficial to owners as it keeps maintenance fees down.

Since it’s advent in 2011, word of the lawsuit has spread like wildfire and and continues to spark discussion among owners. In July of 2014, New York’s Attorney General Eric Schneiderman filed his own suit and obtained a court order that blocked any new sales at The Manhattan Club and prevented foreclosures against owners who refused to pay maintenance fees. The case even dipped into mainstream news in November on CNBC’s “Power Lunch” program. Both events only added more fuel to the fire, and the heated discussion around the issue reached fevered levels. 
It’s now 2015 and only time will tell what becomes of the lawsuit. RedWeek is committed to informing owners as the case progresses – penning several in-depth articles surrounding the subject and keeping an updated report thread where owners can get quick, easy to read coverage on the subject without the legalese. Now, RedWeek is asking owners to get involved. Since The Manhattan Club will not disclose an ownership list, we’re seeking to compile a record of all owners so we can keep them in the loop with the newest updates on the case, including forum updates and our findings from the Attorney General’s, the resort itself and owner groups. Even if you’re not an owner, you can still opt in to receive the latest news.
Whether you’re an owner, know an owner or are just interested in the lawsuit and what it means for the timeshare industry, we encourage you to help share the Owner’s Page so we can reach every owner! If you’re looking for even more ways to get involved, check out the Yahoo! discussion group (open to owners only) as well as the Disgruntled Manhattan Club Owners’ page on Facebook (request an invite to join). And of course, feel free to share your thoughts with us in the comments or on our Facebook page!

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