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September 16, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

Novartis property buyer claims associates cut him out of $18M-plus deal

The former Novartis complex.

A company that paid $18 million for the vacant Novartis campus in Suffern in 2017 has accused business associates of circumventing federal bankruptcy court to hijack the deal.

RS Old Mill LLC, controlled by Yehuda Salamon of Brooklyn, sued Bridgewater Capital Partners, its affiliate Suffern Partners, CPIF Lending and several people affiliated with the companies for up to $100 million, in federal bankruptcy court in White Plains.

Conspirators, the complaint states, “masterminded the sequence of events intended to circumvent the authority of this court and divest the debtor (RS Old Mill) of its sole asset.”

Attorneys representing several defendants did not respond to email requests for comment.

The Novartis property includes 162 acres and a 585,000-square-foot building with offices, laboratories, manufacturing area and a warehouse on Old Mill Road, straddling Suffern and Montebello in Rockland County.

RS Old Mill made a $2.5 million down payment in 2016 to buy the property from the Swiss drugmaker for $18 million. It financed the acquisition with Bridgewater Capital Partners, a company registered to a house in Monsey and controlled by Isaac Genuth and Mark Yunger.

The transaction hit a snag, according to an affidavit by Salamon, when Novartis refused to allow a due diligence environmental investigation of the property. Fearing that the deal was jeopardized, he filed for Chapter 11 bankruptcy protection to stop a termination of the sales agreement.

Salamon claims that the defendants hatched a scheme to defraud RS Old Mill. After acquiring the Novartis property, RS would immediately convey it to another company for zero dollars, and that company would convey it to a third company for $30 million.

The extra $12 million would then pay any remaining creditors in the bankruptcy case, Salamon claims he was told, and he would be given an opinion letter stating that the series of transactions did not need bankruptcy court approval.

With a court-imposed deadline looming to close the deal, and the $2.5 million down payment at risk, Salamon claims RS “literally had no choice but to rely on the representation that the modified transaction was legal.”

Defendants formed new companies: RS Old Mill Rd LLC – identical in name to Salamon’s company except for the addition of “Rd” – and Suffern Partners LLC.

Novartis deeded the property to RS for $18 million. Then RS deeded it to RS Rd for zero dollars. RS Rd deeded it to Suffern for $30 million. Suffern mortgaged it to CPIF for $33 million.

The paper transfers were not disclosed to bankruptcy court, according to the complaint, and the defendants never intended to pay Salamon’s company.

“In fact, to date, the debtor (RS Old Mill) has not received a penny of those promised funds.”

RS accuses the defendants of fraud, conversion, unauthorized transfer of property, civil conspiracy, conspiracy to defraud bankruptcy court and creditors, legal malpractice and breach of contract.

Salamon’s company is asking the court to void the property transfers and mortgage and is demanding $12 million in damages and $100 million in punitive damages.

RS is represented by Kevin J. Nash of Goldberg Weprin Finkel Goldstein, Manhattan, and by Michael Levine, Scarsdale.