Manhattan District Attorney Alvin L. Bragg, Jr., today announced the indictment of HFZ Capital Group (“HFZ”), a real estate investment company; Managing Principal NIR MEIR, 49; and other industry executives for stealing more than $86 million from investors, subcontractors, and New York City through a series of frauds and schemes that began in 2015. In five separate but related New York State Supreme Court indictments, HFZ, MEIR, and others are charged with varying counts of larceny, conspiracy, falsifying business records, tax fraud, money laundering, and more. The indictments are the culmination of a joint investigation by the Manhattan D.A.’s Office’s Rackets Bureau and the New York State Police Special Investigations Unit.
“These indictments depict allegations of widespread fraud within the real estate industry primarily spearheaded by one man: Nir Meir,” said District Attorney Bragg. “In total, we allege these defendants’ conspiracies netted them a total of $86 million stolen from investors, contractors, and the City of New York. My Office’s Rackets Bureau is laser-focused on fraud in the construction and real estate industries and will continue to root out people who steal from investors and corrupt the market.”
The following is based on court documents and statements made on the record.
$37 Million Lien Law Theft at 76 Eleventh
In 2015, HFZ created the 76 Eleventh Avenue Property Owner LLC (“76 Eleventh”) to purchase the block of land between West 17th and 18th Streets between 10th and 11th Avenues for $870 million. HFZ hired OMNIBUILD CONSTRUCTION, INC. (“OMNIBUILD”) to build two mixed-use commercial and residential towers. Funding for the project was deposited into 76 Eleventh’s bank account and became “trust assets” pursuant to New York’s Lien Law. At the direction of MEIR, trust assets that were legally required to be used on this project were instead transferred to different LLCs controlled by HFZ, totaling more than $253 million in four years. Assets were primarily diverted to cover financial shortfalls on unrelated HFZ projects, and at times, to personal accounts controlled by HFZ executives, leading to a shortfall of more than $37 million owed to OMNIBUILD and its subcontractors.
In an attempt to fill this shortfall of funds and hide the true cost of work from the project lender, executives from OMNIBUILD, including JOHN MINGIONE, 54, ROY GALIFI, 62, and KEVIN STEWART, 48, conspired with MEIR, HFZ executives ANTHONY MARRONE, 64, LOUIS DELLA-PERUTA, 69, and various subcontractors to inflate their monthly invoices’ “percentage of completion,” making it appear to the lender that the subcontractors were further along in the project than they actually were. The lender believed executives’ representations and released additional funds to HFZ. When certain subcontractors expressed concerns about submitting falsely inflated monthly invoices, MEIR, MARRONE, and MINGIONE instructed them to continue doing so in order to be paid. This conspiracy netted the participants an additional $6.5 million from the lender.
When HFZ’s financial difficulties became public knowledge through a series of lawsuits, HFZ investors demanded to inspect its financial records. MEIR directed an HFZ accountant to forge certain bank account statements to reflect millions of dollars in investor funds, when in fact, they were nearly empty. In one instance, MEIR instructed the accountant to inflate statements for an account to purport it contained more than $24.6 million, when, in fact, it contained $814.
Unearthing an Unrelated Kickback Scheme
During the course of the investigation, the Manhattan D.A.’s Office uncovered a separate kickback scheme orchestrated by GALIFI and a subcontractor, without the knowledge of HFZ or OMNIBUILD, to steal an additional $300,000 from the project lender. Under the terms of their agreement, the subcontractor agreed to make periodic payments to GALIFI until the entire $300,000 was paid. In return, GALIFI promised to reimburse the subcontractor by fraudulently inflating the cost of change orders to be issued to the subcontractor and paid for by the project lender.
To disguise the true nature of the payments made to GALIFI, the subcontractor created fictitious invoices in the name of GALIFI’s consulting company, JCJ Consulting LLC, on two separate occasions for non-existent services. These payments exceeded $50,000 and were processed through JCJ’s bank account.
$24 Million Lien Law Theft in Nomad
In 2018, HFZ began construction on an office tower on West 30th Street between 5th and 6th Avenues. HFZ created HFZ KIK 30th Street Owner LLC (“KIK”) for this project and hired Pavarini McGovern LLC (“PMG”) to oversee construction. Funding for the project was deposited into KIK’s bank account and became “trust assets” pursuant to the Lien Law. At the direction of MEIR, trust assets that were legally required to be used only on this project were instead transferred into different LLCs controlled by HFZ, totaling more than $107 million in four years. Assets were primarily diverted to cover financial shortfalls on unrelated HFZ projects, and at times, to personal accounts controlled by HFZ executives.
When invoices were due, HFZ returned approximately $83 million to the KIK account – mostly improperly transferred from other HFZ projects – leaving a shortfall of more than $24 million in stolen assets. PMG was not able to pay itself or its subtractors more than $20 million in work performed and materials supplied. MARRONE warned PMG not to notify the project lender, while MEIR made false promises and even sent information about fictitious wire transfers to PMG to hide the theft.
$4.6 Million Stolen for Phony Project in San Francisco, California
In February 2017, Arica Development LLC (“Arica”) invested $5 million towards HFZ’s acquisition and development of a commercial property located at 620 Folsom Street in San Francisco, California. The same day the contract was signed, all $5 million was wired into an HFZ Capital Group bank account.
However, HFZ never acquired the rights to develop 620 Folsom Street. MEIR lied to investors for several years by misrepresenting HFZ’s supposed work on the project. MEIR sent Arica updates about fictitious permits associated with building the project and provided brochures detailing fake cost estimates for every stage of the phony venture.
In total, only $400,000 of Arica’s investment was used in HFZ’s failed acquisition of 620 Folsom Street. HFZ diverted the remaining $4.6 million to other, unrelated projects.
Defrauding the City of $15 Million in Taxes
In New York City, all development companies are responsible for paying City property taxes for all completed but unsold condominium units in their inventory. At the direction of MEIR, HFZ accountants accessed the New York City Department of Finance’s online portal to input information purporting to make a required payment. However, MEIR instructed the accountants to cancel the payments the next day before the money could be withdrawn, or the transactions were rejected by HFZ’s bank for insufficient funds. By failing to pay adequate property taxes in 2018, 2019, and 2020, HFZ defrauded the City of more than $15.6 million.
Assistant D.A.s Christopher Beard (Senior Supervising Attorney for Labor Racketeering) and Garrett Baldwin are handling the prosecution of these cases under the supervision of Assistant D.A.s Jodie Kane (Chief of the Rackets Bureau and Acting Chief of the Investigation Division) and Michael Ohm (Deputy Chief of the Rackets Bureau). Forensic Accountant Investigator Kenneth Zorn and paralegal Camilla Cox assisted with these cases.
D.A. Bragg thanked the New York State Police Special Investigations Unit, Senior Investigator Mark Buglione, Investigator Brahim Dedusevic, and Investigator Steven Connolly for their assistance in these cases. The D.A. also thanked Property Tax Manager Quentin Brown from the New York City Department of Finance for his assistance, as well as the Miami Beach Police Department’s Robbery Squad.
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