WILMINGTON, Del. (CN) - The former finance director of a New York-based real estate developer claims subsidiaries of the Bayrock Group embezzled millions of dollars, defrauded the Internal Revenue Service and extorted money through threats of torture and death.
Jody Kriss claims in Chancery Court that Bayrock Group, the parent company, conspired to impoverish its subsidiaries, including the two defendants, Bayrock Whitestone and Bayrock Spring Street.
According to the complaint: "Since 2002, Tevfik Arif and Felix Satter, individuals residing in New York, joined in 2005 by Julius Schwarz, an individual residing in New Jersey, have controlled the 'Bayrock Organization,' a New York based association of related business entities engaged in the common enterprise of real estate development.
"Notwithstanding its legitimate business activities, the Bayrock Organization is a racketeer-influenced and corrupt organization, which Arif, Satter, and Schwarz have for years operated through a pattern of criminal activity, their predicate acts including (i) the embezzlement of millions of dollars; (ii) schemes and artifices to defraud using mail and wire, such schemes and artifices not just targeted at plaintiff and others similarly situated but also targeted at the government of the United States; (iii) extortion by means of threats of torture and death directed at plaintiff and others; (iv) interstate transportation of stolen property; (vi) financial institution fraud; and (vii) securities fraud."
Bayrock Whitestone and Bayrock Spring Street are the only defendants named in the complaint.
Four of Bayrock's subsidiary holding companies unloaded roughly $140 million worth of assets to an Icelandic corporation for only $50 million, so the subsidiaries could redistribute the $50 million to their majority or plurality member, Bayrock Group LLC, the complaint states.
Half of the $50 million was to be distributed to two of the organization's controllers, with the other $25 million to be used in a new business venture with the Icelandic company, FL Group hf, the complaint alleges. FL Group is not named as a party to the complaint.
Kriss says Bayrock also conspired to obstruct the assessment and collection of income taxes.
The Bayrock organization is arranged in three tiers, the complaint states. Bayrock Group LLC is the top tier, with majority or plurality interests in roughly a dozen first-tier subsidiary holding companies, including the co-defendants. These companies have majority or plurality interests in scores of second-, third- and fourth-tier companies developing various real estate projects, according to the complaint.
The four subsidiaries at issue each corresponded to a certain real estate project, the complaint states.
Bayrock Spring Street corresponded to the Trump SoHo project, a New York City hotel associated with Donald Trump; two of the other subsidiaries at issue, Bayrock Camelback LLC and Bayrock Merrimac LLC, corresponded to the Trump-associated Trump Phoenix and Trump Fort Lauderdale hotels, the complaint states.
Kriss, who was the Bayrock Group's director of finance and had substantial minority membership interests in its subsidiaries, seeks books and records for the purpose of conducting a forensic financial and tax audit.
He is represented by Stamoulis & Weinblatt of Wilmington and Frederick M. Oberlander of Montauk, N.Y.
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