Panel Finds Ex-Broker Fraudulently Conveyed Condo
A former Lehman Brothers Inc. broker fraudulently transferred her $1.2 million Manhattan condominium to her son less than four months after she was ordered to pay a client $2.5 million, a state appeals panel has ruled.
The four-judge Appellate Division, First Department, panel on Tuesday upheld a lower court's ruling calling for the real estate transfer to be set aside.
Justice Peter Tom (See Profile), writing for the panel in Sardis v. Frankel, 115328/10, said ex-broker Sofia Frankel's son Michael had not acquired the apartment as a good-faith purchaser for value, and that the transfer was merely a way to protect the apartment from Sofia Frankel's creditors.
"It is apparent that Sofia's conveyance of the subject Manhattan condominium apartment to her son was but one of a series of transactions undertaken as part of an 'asset protection plan' devised with the assistance of counsel immediately after the arbitration award was rendered against her," Tom wrote.
The plaintiffs, Jeffrey Sardis and Lauren Sardis, entrusted about $19 million to Frankel while she was working as a broker, first for Goldman Sachs & Co. and later for Lehman. By 2004, they allege that they had lost close to $9.6 million of their investment due to Frankel's fraudulent churning of their account. They initiated an arbitration proceeding before the Financial Industry Regulatory Authority.
In October 2008, just two weeks before Lehman filed for bankruptcy, they obtained a $2.5 million award against Frankel. Manhattan Supreme Court Justice Emily Goodman confirmed that award and entered judgment in July 2009, and the First Department affirmed in June 2010.
Only days after the arbitration award, Frankel met with a partner at Proskauer Rose, whose time records show that they discussed an "asset protection plan," and that both Sofia and Michael were present.
In February 2009, according to Tom's opinion, Sofia transferred her condominium apartment at 160 W. 66th St. to Michael for one dollar. The apartment had been appraised at close to $1.2 million in 2008. At the time of the transfer, Michael also executed a promissory note to his mother under which he would pay only interest until 2039, at which point he would pay a balance of under $1 million.
The Sardises then filed a lawsuit against Sofia and Michael Frankel in Manhattan Supreme Court alleging that the transfer was a fraudulent conveyance under the Debtor and Creditor Law.