TOWERS OF SECRECY
Stream of Foreign Wealth Flows to Elite New York Real Estate
By LOUISE STORY and STEPHANIE SAULFEB. 7, 2015
Construction of the Time Warner Center ignited the development of a billionaires row of residential towers overlooking Central Park. Credit Todd Heisler/The New York Times
On the 74th floor of the Time Warner Center, Condominium 74B was purchased in 2010 for $15.65 million by a secretive entity called 25CC ST74B L.L.C. It traces to the family of Vitaly Malkin, a former Russian senator and banker who was barred from entering Canada because of suspected connections to organized crime. Last fall, another shell company bought a condo down the hall for $21.4 million from a Greek businessman named Dimitrios Contominas, who was arrested a year ago as part of a corruption sweep in Greece. A few floors down are three condos owned by another shell company, Columbus Skyline L.L.C., which belongs to the family of a Chinese businessman and contractor named Wang Wenliang. His construction company was found housing workers in New Jersey in hazardous, unsanitary conditions.
TOWERS OF SECRECY
Articles in this series examine people behind shell companies buying high-end real estate.
The Hidden Money Buying Up New York Real Estate
Behind the dark glass towers of the Time Warner Center looming over Central Park, a majority of owners have taken steps to keep their identities hidden, registering condos in trusts, limited liability corporations or other entities that shield their names. By piercing the secrecy of more than 200 shell companies, The New York Times documented a decade of ownership in this iconic Manhattan way station for global money transforming the city’s real estate market.
Many of the owners represent a cross-section of American wealth: chief executives and celebrities, doctors and lawyers, technology entrepreneurs and Wall Street traders.
But The Times also found a growing proportion of wealthy foreigners, at least 16 of whom have been the subject of government inquiries around the world, either personally or as heads of companies. The cases range from housing and environmental violations to financial fraud. Four owners have been arrested, and another four have been the subject of fines or penalties for illegal activities.
The foreign owners have included government officials and close associates of officials from Russia, Colombia, Malaysia, China, Kazakhstan and Mexico.
Official who battled the Canadian authorities over entering their country. See others »
They have been able to make these multimillion-dollar purchases with few questions asked because of United States laws that foster the movement of largely untraceable money through shell companies.
Vast sums are flowing unchecked around the world as never before — whether motivated by corruption, tax avoidance or investment strategy, and enabled by an ever-more-borderless economy and a proliferation of ways to move and hide assets.
Alighting in places like London, Singapore and other financial centers, this flood of capital has created colonies of the foreign super-rich, with the attendant resentments and controversies about class inequality made tangible in the glass and steel towers reordering urban landscapes.
Where it made landfall in New York, in the wake of the Sept. 11 attacks, was the Time Warner Center. More than a decade on, even as a row of sky-piercing palaces rises on the southern rim of Central Park, the Time Warner Center remains the New York archetype of the global phenomenon, reflecting intertwined trends — the increasing sums of foreign money in high-end real estate and the growing use of shell companies.
About $8 billion is spent each year for New York City residences that cost more than $5 million each, more than triple the amount of a decade ago, according to the website PropertyShark. Just over half of those sales last year were to shell companies.
Sales data from PropertyShark. Building data from the Center for Advanced Research and Spatial Information at Hunter College and the N.Y.C. City Planning and Buildings Departments.
The Times examination reveals the workings of an opaque economy for this global wealth. Lacking incentive or legal obligation to identify the sources of money, an entire chain of people involved in high-end real estate sales — lawyers, accountants, title brokers, escrow agents, real estate agents, condo boards and building workers — often operate with blinders on. As Rudy Tauscher, a former manager of the condos at Time Warner, said: “The building doesn’t know where the money is coming from. We’re not interested.”
As an indication of how well-cloaked shell company ownership is, it took The Times more than a year to unravel the ownership of shell companies with condos in the Time Warner Center, by searching business and court records from more than 20 countries, interviewing dozens of people with close knowledge of the complex, examining hundreds of property records and connecting the dots from lawyers or relatives named on deeds to the actual buyers.
COURAGE UNDER FIRE
The New England Patriots quarterback who bought his 74th-floor condo in 2006 through a trust, Courage Under Fire.
Yet in some cases it is nearly impossible to establish with certainty the source of money behind shell companies. Purchasers can register shell companies in the names of accountants, lawyers or relatives. Purchases are often made not just by individuals but on behalf of groups of investors or numerous family members, further obscuring the origin of the funds. What is more, ownership of shell companies can be shifted at any time, with no indication in property records.
The high-end real estate market has become less and less transparent — and more alluring for those abroad with assets they wish to keep anonymous — even as the United States pushes other nations to help stanch the flow of American money leaving the country to avoid taxes. Yet for all the concerns of law enforcement officials that shell companies can hide illicit gains, regulatory efforts to require more openness from these companies have failed.
“We like the money,” said Raymond Baker, the president of Global Financial Integrity, a Washington nonprofit that tracks the illicit flow of money. “It’s that simple. We like the money that comes into our accounts, and we are not nearly as judgmental about it as we should be.”
In some ways, officials are clamoring for the foreign wealthy. In New York, tax breaks for condominium developments benefit owners looking for a second, or third, residence in one of Manhattan’s premier buildings. Mayor Michael R. Bloomberg said on his weekly radio program in 2013, shortly before leaving office: “If we could get every billionaire around the world to move here, it would be a godsend.”
Among the Time Warner Center owners identified by The Times are at least 17 billionaires on Forbes magazine’s annual list of the world’s richest people. Five of the world’s leading art collectors own units, as do eight people who have been chief executives of major companies. And it has been home to numerous celebrities, including the singers Jimmy Buffett and Ricky Martin, the New England Patriots quarterback Tom Brady and the talk show host Kelly Ripa.
A look behind some doors revealed more complicated tales.
Units 72B and 51E are owned by the Amantea Corporation, which The Times traced to a mining magnate named Anil Agarwal. His company was fined for polluting a major river near a copper mine in Zambia, which sickened nearby residents. And judicial committees in his native India determined that his company had violated the land rights of an indigenous tribe near a proposed mine.
When Anna Ai Fang purchased Condominium 58E in 2004 for $2.1 million, the forwarding address on the deed was a decidedly more modest location: her dorm, Ruggles Hall, at Columbia University. At the time, her father, Fang Fenglei, had ended a long career running state-affiliated banks in China and would soon begin working for Goldman Sachs.
Unit 62CE belongs to Prime International Management Group, which in turn is controlled by Alexander Varshavsky, who runs auto dealerships in Russia.
Few, if any, questions were raised by those involved in the deal when Mr. Varshavsky paid cash for the 4,300-square-foot apartment. But his condo shopping did not go unnoticed.
“Agents observed defendant Varshavsky enter several buildings in the Central Park area with a real estate agent, including 25 Columbus Circle, New York, New York,” according to a criminal complaint filed in federal court in Newark, recounting surveillance by federal agents at the Time Warner Center. “In June 2011 defendant Varshavsky purchased an apartment located at that address for approximately $20.5 million in cash.”
In December 2013, Mr. Varshavsky, who is now a United States citizen, was charged with failing to report the existence of a foreign bank account. A lawyer for Mr. Varshavsky disputed the allegations and said he expected the complaint to be dropped.
Meanwhile the case is pending, and Mr. Varshavsky posted bail — his Time Warner condo.
OWNERSHIP BECOMES OPAQUE
It was not all that long ago that Columbus Circle was the makeshift residence of dozens of homeless people squatting at the site of the abandoned New York Coliseum, the Robert Moses-era convention center.
The demolition of the coliseum and the creation of the Time Warner Center — two residential towers with a retail atrium, corporate offices and the Mandarin Oriental Hotel — transformed the area into a vibrant shopping and dining destination in the aftermath of the Sept. 11 attacks. The condos also sparked development of a billionaires row of residential towers overlooking Central Park.
By marketing the condos to wealthy foreigners, Time Warner’s developer was at the forefront of luring cash from overseas to New York real estate. Twenty-six percent of the original sales were to people from other countries, a proportion that has grown to more than half among recent buyers. The complex’s dark glass exterior offers a sheen of both exclusivity and secrecy.
It is no more transparent inside. There are no door buzzers or mail slots with residents’ names. You are unlikely to bump into neighbors wandering the halls because only about a third of the owners live there at any one time, according to people familiar with their comings and goings. The building’s annual holiday party is a lonely affair, they say.
“It’s a really closely guarded secret who is in that building,” said Al D’Elia, an architect who has worked there. “It’s just the way they treat you, what you have to do to get in the building.”
The hallways are spare, but many apartments are loaded with the sort of amenities that have become standard in luxury real estate: panoramic views, stone bathtubs and custom everything — sound systems, millwork, lighting fixtures.
Even the numbering of the floors was a bit of upwardly mobile sleight of hand, calibrated to enhance the perception of what the developer, the Related Companies, marketed as “Five Star Living.” So, the 80th-floor penthouses are actually on 53.
The building’s layout and protocols facilitate anonymity. There are multiple entrances to its 192 condos — not just through the two towers’ main doors, but also through an adjacent parking garage and through the Time Warner Center shops. And while the building has a book listing the names of people associated with units, the owners do not have to be listed for them to get access to the building. They could walk in alongside someone whose name is in the book. Or, if they are cleared to visit, they could enter the complex through the shops or the hotel, and then take the secure elevators to the condos.
“An owner could be obscured from our view,” said David Spector, who helped manage the condos until 2011.
Over the decade since the Time Warner condos came on the market, high-end real estate sales in general have become increasingly opaque. In 2003, one-third of the units sold in Time Warner were purchased by shell companies. By 2014, that figure was over 80 percent.
Across the United States in recent years, nearly half the residential purchases of over $5 million were made by shell companies rather than named people, according to data from First American Data Tree analyzed by The Times.
Public records, dating back to at least the 1800s in New York, set real estate apart as more transparent than bank accounts or stock portfolios. “There’s a whole Jeffersonian rhetoric about land ownership,” said Hendrik Hartog, a professor of the history of American law at Princeton. “There was a goal to make land transparent, and it was justified by civic values and a whole range of moral judgments like not hiding ownership.”
One type of corporate structure now commonly used in real estate transactions, limited liability corporations, or L.L.C.s, did not even exist in the United States before the late 1970s. At first, they were primarily used by oil and gas traders in Wyoming to shield individual owners from liability — if, say, a well worker was hurt — and to avoid taxation of both the corporation and the investor.
Nothing in the genesis of limited liability corporations suggested they would be used to purchase personal real estate, said Susan Pace Hamill, a University of Alabama professor who worked on L.L.C. policy while at the Internal Revenue Service in the 1990s. However, L.L.C.s are now commonly used in real estate for privacy, wealth transfer or shared ownership.
Condo ownership in the Time Warner Center reflects the dual trends of increasing foreign money in high-end real estate and the rising use of shell companies. Credit Todd Heisler/The New York Times
What becomes clear combing real estate records is that many Time Warner buyers have taken even greater steps, beyond using L.L.C.s, to keep their names out of sight. On many deeds, the line for the buyer’s signature is left blank, is illegible or is signed by a lawyer or other representative. Phone numbers are registered under lawyers’ names; the owner’s line on renovation permits is signed by Time Warner staff members; tax statements are addressed to the L.L.C.s.
And because most of the sales are in cash, there are few mortgage statements, another public document that might identify an owner or trigger scrutiny.
A spokeswoman for the Related Companies, Joanna Rose, said the developer had followed all federal and local laws in its sales at the Time Warner Center, adding, “With all of our sales, we know the identity of the purchasers.”
However, documents and interviews with a half-dozen people involved in the sales show that in many cases, the company did not know the actual source of the money behind the sales.
David J. Wine, the former vice chairman of the Related Companies, spoke bluntly of the lack of concern with buyers’ identities. “You pretty much go by financial capacity,” Mr. Wine said. “Can they afford it? They sign the contract, they put their money down with no contingency and they close. They have to show the money, and that is it. I don’t think you will find a single new developer where it’s different.”
Real estate agents say commitment to anonymity is essential. “One thing of being a high-end broker is we have to protect the privacy of our clients,” said Hall F. Willkie, president of Brown Harris Stevens. “If we didn’t, we wouldn’t have them as clients. We’re very much like private bankers in that sense.”
The shift to secrecy also reflects a fundamental change in the ownership structure of luxury real estate in New York. Many of Manhattan’s finest addresses were traditionally organized as co-ops in which residents were joint owners of the building. Co-op boards generally prefer full-time residents and often subject would-be buyers to excruciating scrutiny.
“Those co-ops wouldn’t accept billionaires, especially foreigners,” said Raphael De Niro, a broker at Douglas Elliman.
By contrast, Time Warner and most new luxury buildings are condos; residents own individual units and boards have less power to screen prospective buyers. In addition, at the Time Warner Center and many other buildings, if a condo board rejects a buyer, building rules say all the residents have to chip in to buy the unit, creating a disincentive for the board to be too picky.
“That’s the joy of the condos,” said Julie Maxey-Allison, an agent for Brown Harris Stevens. “That’s why the L.L.C.s buy them. It’s a way foreigners can do whatever they want here.”
In fact, interviews show, condo boards are not always aware of the individuals behind the shell companies.
Seamus McMahon, a former Time Warner owner, said he had no idea units were sold to members of the Saudi royal family while he was on the board in 2006, including one connected to Princess Haifa bint Faisal, the daughter of a former Saudi king, and her husband, Prince Bandar bin Sultan, the former ambassador to the United States. A few years earlier, Princess Haifa had been in the news because of reports that some of her money had gone to a figure who aided the Sept. 11 hijackers. (The United States commission that investigated the attacks found no evidence that the money assisted the hijackers, either directly or indirectly.)
Mr. McMahon said the Related Companies did not usually share details about buyers with board members and did not inform them of the Saudi sale. “They probably asked to keep it quiet,” he said, referring to the Saudis. “Related would have kept it quiet.”
At least 16 foreigners who have owned in the building have been the subject of government inquiries, either personally or as heads of companies. Credit Todd Heisler/The New York Times
BEHIND DOOR 74B
When the corporation with the complicated name of 25CC ST74B plunked down $15.65 million in 2010 for a condo in the Time Warner Center, there was no telling whose money was in play.
But in January 2013, the corporation accused a contractor of overbilling in a classic New York City renovation dispute. The lawsuit identified the apartment’s owner as “Vitaly Malkin, a Russian senator who is domiciled in Russia and generally is not present in New York.” Less than two weeks later, a new complaint was filed with a change: It now said the apartment was owned by a trust whose beneficiaries included Mr. Malkin’s son, Leonid, and that Mr. Malkin was neither a trustee nor a beneficiary of the trust.
In a deposition, a former employee of the contractor said that while he understood that the client was “the senator, the Russian oligarch,” he was not allowed to refer to the client by name. If he did use the family name, he said he was reprimanded and told “to make sure I just used 25CC.”
In fact, Vitaly Malkin had been in public view for more than a decade, sometimes tied to controversy.
Mr. Malkin, 62, made a fortune in metals and banking and was one of the wealthiest members of the Federation Council, Russia’s upper legislative house. He resigned from the Council in March 2013 after Aleksei Navalny, the Russian anticorruption activist, revealed that he had failed to disclose property he owned in Canada and that he had dual Israeli citizenship.
But the case that has dogged Mr. Malkin involves a 1996 deal to restructure Angola’s $5 billion debt to Russia, an arrangement that has become a symbol of official plundering in Africa among anticorruption advocates.
A trust traced to Mr. Malkin’s family owns a condo in the Time Warner Center. Credit Associated Press
The debt, incurred during Angola’s long civil war, was cut to $1.5 billion in a deal partly negotiated by Arcadi Gaydamak, a Russian-born businessman. But the debt payment was conveyed through an intermediary company in which Mr. Malkin had a share, according to documents from the Canadian government and Swiss investigators.
When Angola paid the debt, Mr. Gaydamak received $130 million of the payment and Mr. Malkin received $48.8 million, the documents show. A portion also went to various Angolan officials, including President José Eduardo dos Santos, who received $36 million, according to a report by the advocacy group Corruption Watch.
Mr. dos Santos and Mr. Gaydamak did not respond to inquiries from The Times.
“Everyone knew exactly what happened,” Rafael Marques, an Angolan journalist and activist, said of the payment to the president. “That money was for personal enrichment. They were kickbacks.”
middlemen like Mr. Malkin in the restructuring of Angola’s war debt to Russia came under criticism. Credit Joao Silva/The New York Times
The episode became an issue for Mr. Malkin in 2007, when he tried to gain entry to Canada, where he had business interests. Two years earlier, a Canadian immigration official had deemed Mr. Malkin “inadmissible,” writing that he had “massively misrepresented” his net worth and how he obtained his assets, according to court documents obtained by The Times.
When Mr. Malkin reapplied in 2007, among the issues was his role as Mr. Gaydamak’s banker in the Angola debt deal, the documents show. In addition to facing questions in the debt deal, Mr. Gaydamak was under investigation in France in connection with arms sales to the Angolan government. He was later sentenced to three years in a French prison for money laundering and tax fraud.
Canadian immigration officials again declared Mr. Malkin inadmissible, this time because of what they called an “extended association with persons suspected to be involved in organized crime and money laundering.”
In court papers, Mr. Malkin vehemently denied involvement in organized crime, calling the allegations by the Canadian authorities unsupported and noting that he had been free to travel to other countries. Mr. Malkin sued the Canadian authorities, and in June 2009 a judge ruled that the case should be reviewed because Mr. Malkin had not been given a chance to respond to the allegations.
Mr. Malkin was allowed to visit Canada in 2012, his lawyer, Gregory Sidlofsky of Toronto, said in an email, adding, “Canadian authorities never had nor provided any evidence of any wrongdoing by Mr. Malkin.” In the Angola debt case, he said, Swiss investigators ultimately found no wrongdoing. Mr. Sidlofsky said the $48.8 million was a dividend reflecting his client’s share of the intermediary company. As for the long-running renovation of the Time Warner condo, he said, “Mr. Malkin does not own the apartment, nor has he had any recent involvement in the renovation.”
Two real estate agents, Elizabeth L. Sample and Brenda S. Powers, have represented a number of foreign clients in transactions at the Time Warner Center. Credit Josh Haner/The New York Times
The American Bar Association suggests that government officials like Mr. Malkin warrant enhanced scrutiny in real estate deals, but its guidelines are voluntary. Marc Isaacs, the New York lawyer who handled the condo purchase, said his firm’s client vetting goes beyond an online search, but he would not elaborate. Asked about Mr. Malkin, Mr. Isaacs said he could not discuss specific clients.
The real estate agents on the Time Warner deal included Brenda S. Powers and Elizabeth L. Sample, who represent many foreign clients and who live in the building. Ms. Sample said that her focus when vetting buyers was this: “They have to have the money. Other than that, that’s it. That’s all we need.”
A BLIND EYE
Federal banking guidelines are clear: “Banks should take all reasonable steps to ensure that they do not knowingly or unwittingly assist in hiding or moving the proceeds of corruption.” This means screening customers to determine whether they are “politically exposed people” — foreign officials and their relatives and associates — and filing a “suspicious activity report” if the customers transfer unusually large amounts of money.
But such checks are not required on money flowing into the country through shell companies to purchase high-end real estate.
L.L.C.s and other corporate entities can be established in various states without revealing their true owners. Even when such companies move money through a bank account, banks are not required to know who is behind the transaction because of a loophole in the law.
In many ways, the government has allowed the real estate industry to turn a blind eye to the source of money used to buy luxury properties.
It might not have turned out this way. In the late 1990s, after congressional hearings highlighted corrupt foreign officials with money in the United States, the Justice Department sought to expand the list of industries required to screen the financial activities of politically exposed people. That included jewelry sales, hedge funds and real estate.
The proposal gained momentum after Sept. 11, when the Justice Department pushed to make it part of the Patriot Act. The rules were included in the law and handed to the Treasury Department to put into effect.
The real estate and legal professions sprang into action, arguing that background checks were impractical and would hurt the economy. “The money-laundering risks presented by real estate closings are relatively small, compared to other types of financial assets,” the American Land Title Association said in comments on the proposed rules.
Businesses insisted that tainted money was not likely to flow into real estate. “Anonymity and liquidity, two characteristics important to money launderers, typically do not exist in real estate transactions,” the Dechert law firm wrote.
The industry’s assertions ignored the increasing use of shell companies and how often wealthy foreigners sought out high-end real estate as a safe deposit box.
At the Time Warner Center, for instance, at least a dozen purchases would have received greater scrutiny under the expanded rules.
But the Treasury Department never imposed the requirement on real estate or some other industries. Similarly, a proposal to extend the concept of the “know your customer” banking rule to the identities of people behind L.L.C.s and other shell companies that open bank accounts has been stalled for nearly three years in the Treasury Department.
Banking associations say it would impose undue costs on them because there are no reliable federal or state databases with shell company owners.
In fact, registering shell companies has become profitable for states like Delaware and Nevada, which also have lobbied against transparency.
“I don’t see some kind of global effort to stop all this because the money’s too good,” said David M. Crane, a Syracuse University law professor who oversaw the United Nations’ effort to recover money from Charles Taylor, the former Liberian president who was convicted of war crimes and thought to have plundered his country.
A number of states do not require people forming companies to reveal the names of the owners or show any identification.
This opacity presents challenges for law enforcement officials, who say billions of dollars in suspicious money move through shell companies each year. “It can be very, very difficult to penetrate who is the beneficial owner of these shell companies,” said Leslie R. Caldwell, chief of the Justice Department’s criminal division.
She said that the department’s Kleptocracy Initiative has found that foreign officials often use shell companies or immediate family members to move large amounts of money to United States real estate.
In 2010, a Senate committee investigating corrupt money moving into the country drew attention to a shell company used by the sister of the president of Gabon to buy a $2 million residence in Manhattan, and to an L.L.C. used by the son of the president of Equatorial Guinea to purchase a $30 million home in Malibu, Calif.
The proliferation of shell companies incorporated in the United States has hurt Washington’s attempt to get other countries to crack down on Americans who move money offshore to avoid taxes.
“We are in a totally inconsistent position,” said Carl Levin, a Michigan Democrat who pushed for transparency in shell companies when he served in the Senate. “We’re way behind in terms of keeping up with what the international standard is, and it weakens our argument when we go to try to crack down the use of these offshore tax havens.”
About a year ago, after the Group of 8 industrialized nations issued goals requiring identification of shell company owners, a British representative met with Justice Department officials to complain about the United States’ failure to comply.
According to two people at the meeting, the British representative, Dominic Martin, delivered a stern message: The lax American laws were being used by other countries as an excuse for inaction.
Such a message resonates with Justice Department officials who have advocated tightening the rules.
“For a long time we’ve taken the view that you have to focus on the people that manage the gateway to the financial system, and those guys are not only the banks,” said Stefan Cassella, a Justice Department lawyer. “Bad guys who are trying to invest money in the financial system — they use lawyers, they use accountants, they use real estate, they use jewelers and private jets.”
TRANSACTIONS AMID INVESTIGATIONS
Just two months after the collapse of the Ponzi scheme run by Bernard L. Madoff in 2008, another Ponzi schemer was arrested: James Nicholson, whose Time Warner condominium was frozen. Mr. Nicholson’s $8.5 million unit would become the only one in the complex to be seized and sold off by law enforcement officials, even though other owners have been accused of wrongdoing. The difference is that Mr. Nicholson is an American citizen.
Foreigners who buy real estate in the United States often have an easier time keeping it out of the reach of investigators, victims and plaintiffs back home.
TARGETED BY U.S. MARSHALS
American hedge fund manager arrested in early 2009 on charges of financial fraud. His condo was sold by the U.S. Marshals Service in 2010, two months before Mr. Nicholson was sentenced to 40 years in prison.
Take the case of Pablo Ardila, a former provincial governor in Colombia known for hunting trophies and lavish spending. Mr. Ardila acknowledged to The Times in 2004 that he and his parents had set up a shell company to buy a $4 million condo in the building. In 2007, while he was in office, Mr. Ardila was arrested and immediately jailed by local officials on charges of enriching himself illicitly.
While Mr. Ardila was behind bars, the shell company sold the condo, making a $2 million profit. By then, the forwarding address on property records was no longer in Colombia, but went to a Jhon Ballesteros, in Weston, Fla. John Burger, a real estate agent who represented the seller, said recently that he did not know Mr. Ardila was involved.
An extensive Colombian government analysis of Mr. Ardila’s holdings filed in court failed to unearth the Time Warner condo.
Despite international agreements, the authorities in smaller countries have difficulty recovering assets from abroad. “Judges in Colombia have been struggling a lot to get this money back to Colombia,” said Elisabeth Ungar Bleier, executive director of the Colombia branch of Transparency International, an anticorruption nonprofit.
Mr. Ardila was released from jail after two years and nine months without having been convicted. However, Arnulfo Mendez Castro, a spokesman for Colombian prosecutors, said Mr. Ardila was still under investigation.
Mr. Ardila’s lawyer, Mauricio Cristancho, said his client was the victim of “an absurd prosecution.” Despite what Mr. Ardila had told The Times about the condo, the lawyer said, the unit belonged to Mr. Ardila’s father, a wealthy businessman. He said Mr. Ballesteros, who did not reply to inquiries, was an assistant to the family.
The Ardila condo was not the only foreign-owned unit in Time Warner that was sold after an owner faced an investigation.
Mr. Contominas, the Greek businessman, sold his condo nine months after he was arrested in January 2014 and accused of using a commercial loan for personal expenditures. His lawyer, Grigorios Tsolias, said Mr. Contominas “is strongly denying any criminal accusation.”
Stewart Ford, another Time Warner owner, was facing a fraud investigation in October 2010 when he transferred the $6 million condominium he had bought in his own name to a shell company. At the time, Mr. Ford’s firm, Keydata Investment Services, was at the center of one of the biggest financial collapses in Britain, with an estimated 30,000 victims.
That summer, it had been revealed that he had transferred close to $60 million out of Keydata investments before his company was put in receivership by the British government, and moved it into shell companies and trusts that benefited his family.
SHIFTING TO A SHELL
Scottish former chief executive of Keydata, an investment firm that collapsed in 2009, losing the savings of some 30,000 people. Soon after, he shifted his condo into a shell company and sold it. See others »
Phil Burbidge, a disabled former teacher, said he invested through Keydata in 2008 but lost his life savings when the firm imploded the next year. “I’m in complete and utter poverty,” Mr. Burbidge said. “It’s all gone. I can’t even mend the roof.”
British financial authorities have concluded their investigation and notified Mr. Ford that they plan to take enforcement action, a spokesman for the British Financial Conduct Authority said in an email to The Times.
Mr. Ford, in turn, is appealing the authority’s decision, the spokesman said. In an interview, Mr. Ford said the government should not have put his company into receivership. He added that the funds he transferred out of Keydata investments were fees legitimately owed to entities his family controlled.
He has since sold the Time Warner condo.
Mr. Ford’s critics say he appears adept at keeping his assets out of reach of the authorities and bereft investors.
“We don’t believe he’s got any assets that are touchable,” said Geoff Hartnell, a financial adviser in Britain who invested in Keydata products and also sold them to 70 clients. “First of all, we know that he had trusts set up in the Dutch Antilles, trusts in Tortola, in the Virgin Islands.” He added: “If they turn around and fine him, then he says, ‘I’m not going to pay it.’ Since it’s civil, what can they do?”
Even a computer server in the company’s office proved difficult for the authorities to examine. When British regulators seized it, Mr. Ford sued and said he did not own it. In fact, it was owned by a company that promoted Scottish culture, which in turn was owned by a shell company that was 70 percent owned by a trust, which, it was eventually revealed, was set up for Mr. Ford’s four children.
ANONYMOUS IN NEW YORK
Like most Time Warner owners, Anil Agarwal, an Indian mining magnate, is anonymous in New York. While interviews and private documents reviewed by The Times confirm he is behind condos purchased by the Amantea Corporation for $9.1 million in 2004, his name appears nowhere on public records. The deeds for Amantea’s Time Warner condos — one on the “maids floor” and another with sweeping views of Central Park — are signed by a New York lawyer named Constance Cranch. When contacted, she said: “You cannot say anything with respect to me. It’s a client of mine’s apartment, and I pay their bills.”
Chairman of Vedanta, a global mining conglomerate. His company was found to have caused severe pollution in India and Zambia.
For all the secrecy at Time Warner, Mr. Agarwal is hardly private about his wealth. He spends much of his time in London and told a newspaper in 2005: “I have to have a Bentley, the best of chauffeurs and butlers.”
But Mr. Agarwal and his company, Vedanta Resources, are known in some parts of the world for having left financial and environmental problems in their wake.
He moved his company from India to London in the late 1990s, after it was banned from the Mumbai stock exchange for involvement in a prominent insider trading case.
Ten months before he closed on his Time Warner condos, Mr. Agarwal, his father and his brother were found to have illegally moved money out of India using shell companies in Mauritius and the Bahamas. The Agarwals, an Indian judge later wrote, “tried to pull wool over the revenue’s eyes and manipulated foreign exchange.”
There were also complaints about Vedanta’s environmental record and treatment of residents near its operations.
The company has faced criticism over its financial and environmental record. Credit Andrew Testa for The New York Times
In September 2004, an Indian Supreme Court committee stated that Vedanta had dumped thousands of tons of “arsenic-bearing slag” around its factory in the southern state of Tamil Nadu. Gro Nystuen, a lawyer who evaluated companies for Norway’s pension fund, said the pollution was “harming the environment to such an extent that it also harmed the people living in the neighborhood.”
The next year, another Supreme Court committee accused the company of forcing 102 indigenous families from their homes in Odisha State, in eastern India, where it sought to mine bauxite for use in an aluminum refinery. According to the committee’s report, residents were “beaten up by the employees of M/s Vedanta.”
“An atmosphere of fear was created through the hired goons,” the report said. “After being forcibly removed they were kept under watch and ward by the armed guards of M/s Vedanta and no outsider was allowed to meet them. They were effectively being kept as prisoners.”
As Vedanta pursued its mining plan over several years, the plight of the indigenous tribe in Odisha became a focal point for international activist groups. The cause was taken up by Rahul Gandhi, the son of a former prime minister, as well as by Bollywood stars such as Gul Panag, who withdrew from a Vedanta marketing campaign.
The British commerce agency issued a rebuke of Vedanta’s actions in Odisha, and the Church of England’s investment funds sold their shares in the company in protest. “It was just very apparent that the lives of the villagers immediately around the refinery had been made worse, rather than better,” said Edward Mason, the chief of responsible investment for a $9 billion church fund. “The villagers had not been properly consulted about the process, or properly compensated.”
The company was fined for environmental damage in that country. Credit BlueSalo
Vedanta’s operations elsewhere have drawn intense criticism. Its copper mine in Zambia has been a source of both pollution and suspicion of financial improprieties. In 2006, two years after Vedanta acquired the mine, the company dumped hazardous waste into the Kafue River, a major source of drinking water for the country, according to a lawsuit filed on behalf of 2,000 residents. Fish were dying, according to the ruling in the case, and local residents experienced skin diseases, lung pain and diarrhea.
The company was fined by a local judge who wrote: “This was lack of corporate responsibility and criminal and a tipping point for corporate recklessness.”
Last year, Zambian officials began an audit based on suspicions that Vedanta was not paying the government its proper fees. Hundreds of former mine workers are fighting Vedanta for severance or disability pay. “This company is making its own rules in Zambia,” said Darious Yundayunda, a former miner who has been active with a group called Foil Vedanta. “People are struggling.”
Mr. Agarwal declined The Times’s interview requests over several months. But Vedanta has said publicly, “We remain fully committed to pursuing all our investments in a responsible manner, respecting the environment and human rights.”
Despite the complications and controversy, Mr. Agarwal’s fortune, according to Forbes, has grown from $1 billion to an estimated $3.5 billion since he purchased his condos at Time Warner.
When Mr. Bloomberg set out the welcome mat for the world’s billionaires, the idea was this: Money they spent would trickle down to the doormen, concierges, cleaners, drivers and construction workers, as well as to the shopkeepers and restaurateurs who sell $5,000 handbags and $450 sushi dinners.
And many of the players at the Time Warner Center are indeed big spenders.
After Maxim Finskiy, a Russian business associate of the Brooklyn Nets owner Mikhail Prokhorov, moved in, he imported his Bentley.
Robert Tsao, who gave up his Taiwanese citizenship after authorities there sued him unsuccessfully for investing in mainland China, owns one of the world’s most renowned private collections of Asian art.
Adam Chen, who graduated from New York University in May, was one of several college students to use the complex as a dormitory. He celebrated his birthday last year at the restaurant Per Se in the Time Warner Center, dining on its famous starter, Oysters and Pearls, all captured in photographs on Instagram.
The precise impact of wealthy foreigners on the city may be more complex, though. As nonresidents, they pay no city income taxes and often receive hefty property tax breaks. A program aimed at new condo development doles out about a half-billion dollars in tax breaks a year, according to the city’s independent budget office. These savings are passed on to owners in the form of lower property taxes. The Time Warner Center was not part of the most lucrative tax break program, but many other buildings around Central Park have benefited.
The city’s first condo costing more than $100 million, which sold in the last few weeks at the new luxury tower One57, had property taxes this past year of $17,268, according to the city’s finance office. Those taxes will go up over time, but for now that is a savings of more than $359,000.
The Fiscal Policy Institute, a nonprofit in New York, recently suggested a downside to the influx of billionaires who are in the city only sporadically.
“In terms of the local economy, you don’t have people who are going to plays, going to restaurants,” James Parrott, the institute’s chief economist, said. “They’re not spending at the dry cleaners, the grocers and all of that, so it deprives New York of all that local multiplier effect.”
What is more, Mr. Parrott said, the skyrocketing prices of the pieds-à-terre are affecting the price of real estate in the city more broadly. “There’s a downside to having such pressure at the top. It pulls up the prices overall. When owners of $10 million condos see that there’s a big market for $95 million condos, they’re more likely to raise their prices,” he said. “Then the person at $2 million raises his prices, then the person at $1 million sees that and there aren’t any prices below $1 million.”
Through a spokesman, Mr. Bloomberg said last month that he had hoped billionaires who moved to New York would not simply be part-timers but would live in the city and pay taxes “so we could use that revenue for government services that, incidentally, disproportionately benefit lower-income New Yorkers.”
Some local politicians have suggested taxing the owners of pieds-à-terre who are not city residents.
“We are spending money to keep them safe and maintaining the infrastructure,” said Brad Lander, a city councilman. “Should there be the equivalent of a commuter tax? An international residents tax?”
A proposal from the Fiscal Policy Institute would impose a graduated tax on pieds-à-terre worth $5 million or more. The group estimates it would generate $665 million a year in revenue for the city, mostly from owners of the approximately 445 apartments valued at more than $25 million.
PEELING BACK LAYERS
There is no simple way to unmask ownership of a shell company. Exploring each of the more than 200 shell companies that have owned units in the Time Warner Center became its own journey, with its own surprise ending.
The case of Columbus Skyline, which paid $25.6 million for three condos, began with two clues: a barely legible signature and a forwarding address.
The signature on the deeds was difficult to read, but in one spot it could be made out: Wang Zi. A search of that name did not yield obvious results, but a Wang Zi did register a phone number at Time Warner. The Times cross-referenced that number and found it was tied to a firm called MQ Realty with an address at an apartment in a public housing complex in Chinatown. A visit to that apartment yielded little more than a conversation in Chinese with a neighbor who said the person behind MQ Realty had recently moved. It was a dead end.
The second clue proved more promising. Columbus Skyline was formed in New York State. While the state filing does not list the name of the L.L.C.’s owner, it does have an address: 10 East 39th St., Suite 1110. In public records, one name comes up as having used that address: Wang Wenliang.
Chinese mogul whose company builds embassies and consulates worldwide. The company housed some workers in what Jersey City authorities deemed “troubling” conditions. See others »
Further searches turned up a prominent Wang Wenliang. This Mr. Wang is a former municipal official in Dandong, a city on China’s border with North Korea, and a member of the National People’s Congress, China’s parliamentary body. Among his businesses is a construction empire that has worked on numerous consulates and embassies for the Chinese government, and he is worth hundreds of millions of dollars. He is on the board of trustees of N.Y.U., where he donated $25 million.
But establishing that Mr. Wang from Dandong was the owner of the Time Warner condos required more confirmation.
The lawyer listed on the condo sales was David Glassman. A search of commercial property filings showed that Mr. Glassman had also done legal work for an affiliate of Mr. Wang’s company, China Rilin Construction Group.
When The Times called Mr. Glassman, he briefly discussed the condos and said he would ask Mr. Wang if he would be interviewed about his ownership.
Another round of searches found a less glamorous side to real estate used by Mr. Wang’s company in the United States. In February 2011, the housing task force in Jersey City followed up on a complaint from a resident on Pavonia Avenue about the number of people living in a single-family residence rented by Rilin. “We conducted the inspection and uncovered conditions that were very troubling to say the least,” wrote Mark Redfield, the task force chairman.
“There were 15 Asian males with no identification, passports, or work visas all residing in this one-family attached rowhouse,” an internal email from Mr. Redfield said. “The house was divided up into sleeping quarters to accommodate 28 roomers,” he wrote, adding, “The crammed quarters were extremely unsanitary and posed an imminent hazard.”
The same day, Jersey City officials found “the same conditions” at another house that was used by Rilin for its workers, according to city records.
In 2013, Jersey City inspectors reported finding an illegal rooming house at another location used by Rilin. An internal city email said the building was “housing Chinese workers who work for the Chinese Embassy as construction workers. This is the same group China Rilin Construction Corp. that the task force issued summonses to in 2011 for housing multiple Chinese workers.”
Rilin paid fines of several thousand dollars for the 2011 violations. The outcome of the 2013 case was unclear from city records, but the company said it had been dismissed.
Mr. Wang’s lawyer said Rilin “took the allegations very seriously, and the reported violations were all quickly remedied by the company or dismissed.” He disputed the idea that 28 people lived at the Pavonia Avenue house, saying the top bunks had been used for storage. He said the Wang family had purchased the Time Warner condos through a shell company partly because a disgruntled former employee had threatened to harm them.
When The Times asked Ms. Sample, the Time Warner real estate agent who represented Mr. Wang, for information about his condo purchases, she shot back: “How do you know about him?”
Reporting was contributed by Xu Wang from New York; Carlotta Gall and Youssef Gaigi from Tunis; Alejandra Xanic von Bertrab from Mexico City; Joe Cochrane from Jakarta, Indonesia; Niki Kitsantonis from Athens; Andrew Roth from Moscow; and Vinod Sreeharsha from Rio de Janeiro. Lisa Schwartz, Neha Thirani Bagri and Amy Qin contributed research.
http://www.nytimes.com/2015/02/08/nyreg ... ondos.html
Statistics: Posted by yoda — Sat Feb 07, 2015 1:12 pm