“The Investigation Continues”

 

July 30, 2014

Charged with two felonies which placed him at the center of a scheme to sell the Hillcrest Elementary School at up to $6 million under its appraised value, Avi Vardi walked out of a Clarkstown courtroom yesterday with a three-year probation and a small fine. The felonies had been kicked down to a single misdemeanor based on a technicality about when he performed the lowball appraisal. How did this happen?


 

The Original Charges

On July 31, 2013, Simon Brandler, the Assistant Attorney General of New York, filed charges against Avi M. Vardi. The 57-year-old real-estate appraiser, who had been hired by the East Ramapo School Board’s attorney, was charged with grand larceny in the third degree and filing a false instrument in the first degree. Both charges were felonies.

 

The grand larceny count accused Vardi of acting with others in October 2010 to steal property, the value of which exceeded three thousand dollars. The false instrument charge said that he, acting with others, filed a written document (the appraisal for the Hillcrest Elementary School) which he knew contained a false statement and false information.

 

The Evidence

According to the Attorney General’s charges there were eight sources of information that would prove these accusations. These sources include:

1.    Witness interviews and statements.

2.    A review of records received from the East Ramapo Central School District and its law firm (Minerva & D’Agostino), including board minutes, bidding materials, email messages, and administrative filings.

3.    A review of records produced by appraisers and others concerning the value and potential sale of District property.

4.    A review of bank transactions, call logs, email messages, and other documentary evidence supplied by financial institutions and telecom companies.

5.    Analyses performed by an expert appraiser.

6.    A review of documents and filings submitted to or prepared by the State Education Dept., the Dept. of State, and other agencies.

7.    Discussions with Attorney General staff and other members of law enforcement.

8.    Other sources.

 

This information was used to produce a narrative of events that appeared in the filing papers with a title: “The crimes were committed in the following manner.” The complaint’s retelling appears below:

 

Summary of the Scheme

On July 23, 2010, Vardi, along with others known to the Office of the Attorney General (OAG), falsified a real estate appraisal report and delivered it to the East Ramapo School District to justify selling the Hillcrest School for $2.66 million less than its independently appraised market value. Vardi later demanded and got a $3,500 fee for this appraisal from the District. He claimed that the appraisal reflected an independent and accurate valuation of the property.

 

The Parties Involved

The School Board, which is responsible for the District’s budget and operations, including the District’s real estate.

 

Avi Vardi is the owner of the Appraisal Group International (AGI).

 

Another company that did an appraisal of the Hillcrest School and property was Valuation Plus, Inc. (VPI)

 

Albert D’Agostino of the law firm Minerva and D’Agostino is a partner in the law firm hired by the East Ramapo Board to serve as the Board Attorney.

 

Congregation Yeshiva Avir Yakov is the private religious school from New Square that wanted to buy the Hillcrest School

 

An individual named only as the BIDDER in the charges represented Avir Yakov for various purposes including helping prepare Avir Yakov’s bid to purchase the Hillcrest School. (Although only referred to as BIDDER, the investigators do know who this individual is.)

 

The Board Attempts to Sell the Hillcrest School

On April 19, 2010, the Board passed a resolution that declared the Hillcrest School as “surplus property.” The resolution authorized the Board’s president to hire VPI (Valuation Plus) to prepare a real estate proposal of the school.

 

That appraisal from VPI, dated May 4, 2010, stated the appraised value was $5.9 million. To achieve the property’s market value, the VPI appraisal recommended offering the property on the market for an “exposure” period of 12 months.

 

On June 16, 2010, the District released a request for bids to buy or lease the Hillcrest School that gave potential bidders a deadline of July 7, 2010, to submit their bids—22 days not the 12 months that VPI advised.

 

By the July 7 deadline, only three bids were submitted. All three were for far less than the $5.9 million appraised value. The bids included:

a)   $1.65 million from Pascack Valley Learning Center, a private school;

b)   $3.1 million from Avir Yakov;

c)    $4.3 million bid (with added conditions) from ZD Square Realty Corp., a New York State corporation.

Avir Yakov’s proposal to purchase the school for close to half its appraised value became the high bid when ZD Square Realty’s $4.3 million bid was no longer considered by the Board.

 

Vardi Agrees to Falsify Appraisal for BIDDER

In or around July 2010, an individual referred the BIDDER to Avi Vardi. (This person is known to the investigators but not named here.)   

 

On July 15, 2010, eight days after the three bids for the Hillcrest School had been received, the BIDDER and Vardi arranged to meet at the School. At that meeting, Vardi, and an associate appraiser known to the investigators, the BIDDER, and several other Avir Yakov representatives inspected the school grounds. At this meeting, Avir Yakov representatives paid Vardi $5,000 in cash to provide an appraisal on a “rush” basis.

 

Avi Vardi never sent an appraisal report to Avir Yakov or the BIDDER.

 

Vardi Agrees to Deliver False Appraisal to the District

The individual referred to as the BIDDER, who had no Board responsibilities, then arranged for Vardi’s services in preparing the appraisal to be applied on behalf of the District, instead of Avir Yakov.

 

On July 16, 2010, a member of the East Rampo Board emailed Vardi’s private cell number and other contact information to the Board’s attorney. Later that afternoon, that attorney hired Vardi to furnish his appraisal of the Hillcrest School to the District in time for a July 28, 2010, Board meeting. (Although the Board member acting here as a go-between is not named in the papers charging Vardi, the investigators note that this person’s identity is known by them.)

 

At Vardi’s direction, an associate appraiser compiled an initial appraisal draft. Vardi then manipulated “adjustments” in the appraisal to lower the value of the Hillcrest School from that in the associate’s initial draft to a value slightly above Avir Yakov’s bid price. Vardi finalized the appraisal by signing the cover letter and an associated certification on July 23. The final evaluation claimed that the Hillcrest School was worth $3.24 million, which was within 5% of Avir Yakov’s bid of $3.1 million.

 

Knowing that the School District would rely on his evaluation in selling the School to Avir Yakov, on July 23, Vardi directed his associate to mail the AGI appraisal to the School Board’s law firm—Minerva & D’Agostino. On or about that same day, AGI sent a bill to the Board attorney for $3,500, the fee they had agreed on for appraising the Hillcrest School.

 

Vardi’s Appraisal Was Materially False

The AGI (Avi Vardi’s) appraisal reflected a valuation for the School based on a prior agreement with a prospective buyer represented by the BIDDER, not the independent judgment of the defendant, Vardi, a licensed appraiser. The result was an appraisal that valued the Hillcrest School as worth $2.66 million—or approximaely 45%--less than a contemporaneous appraisal by an impartial licensed appraiser.

Vardi falsely certified in his appraisal that: My engagement in this assignment was not contingent upon developing or reporting predetermined results.”; and that “The reported analyses were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice.”

 

He also certified that “I have not appraised this property in the three years prior to accepting this assigment.”

 

The Attorney General’s Office cited additional violations with:

a)   the failure to disclose that Avir Yakov was a client with respect to the same property;

b)   the use of a property sold for land value as a “comparable sale” when computing the value of a school building; and

c)    the lack of explanation or documentation to support certain adjustments which lowered the value of the Hillcrest School.

 

And finally, regarding Vardi’s payment by the school board, the complaint explains:

Although Vardi had already received $5,000 from Avir Yakov on July 15, the defendant pursued a second payment from the District. In an Oct. 6 email to the School Board’s Attorney, the defendant demanded to know, “When can I get paid on this appraisal? It’s going on 3 months!” Acting on the false understanding that AGI had furnished an independent appraisal, the District thereafter remitted $3,500 to AGI with a check dated Oct. 22, 2010. Vardi deposited the check into his bank account on Oct. 27, 2010.

_______________________________End of Attorney General’s Felony Complaint

 

Yesterday in Clarkstown Justice Court, three days short of exactly one year after his arrest and arraignment, Avi Vardi pleaded guilty to a misdemeanor charge in a plea bargain that avoided most of the original charges made by the Assistant Attorney General. No mention of the allegations about the $5,000 payoff from Avir Yakov, the false comparables, the lies of omission about his relationship with the buyer, grand larceny related to the millions denied the East Ramapo school system. There was one small technicality which the court addressed. Avi Vardi admitted that he “had appraised the Hillcrest School property within the three years prior to accepting my assignment from the District, and intended that the Direct record would not reflect that previous assignment.”

 

Here is the text of his total, and only admission of guilt in this matter:

Allocution

 “On or about July 15, 2010, a representative of Congregation Yeshiva Avir Yakov paid me to furnish an appraisal in connection with its efforts to purchase a school property located at 32 Addison Boyce Drive in New City, New York. This school is often called the Hillcrest School. 

On or about July 16, 2010, the East Ramapo Central School District hired me to supply this appraisal to the District’s Board of Trustees.

On or about July 23, 2010, I directed my appraisal of the Hillcrest School to the District knowing that, despite my sworn certifications to the contrary, I had appraised the Hillcrest School property within the three years prior to accepting my assignment from the District, and intended that the Direct record would not reflect that previous assignment. 

I received $3500 from the District in connection with this appraisal.”

(Avi Vardi, read in court July 28, 2014)

 

Judge Craig Johns then dropped his gavel on a sentence of three years probation, a requirement to repay the $3,500 to ERCSD, and a $1,000 fine. And the millions lost to the school children due to the “ ‘adjustments’ in the appraisal to lower the value of the Hillcrest School from that in the associate’s initial draft to a value slightly above Avir Yakov’s bid price?” Nothing. Was this a disappointing Nolo Contendere from the prosecution!

 

The BIDDER and the Board Member

There are several principals whose involvement in this matter have not been clarified or resolved. In a call yesterday afternoon to the Office of the Attorney General in New York City, Preserve Ramapo was told by a spokesperson for the Assistant AG, Simon Brandler, that the matter of the Hillcrest Appraisals was not completed. When asked whether Vardi had been cooperating before the trial and would cooperate after, and whether this might be the reason for the results in court, the spokesperson said she could not comment on that, but she did answer two consequent questions with the same response, “The investigation continues.”

 

Last year, when Vardi was arrested in July, the investigation into the Hillcrest sale was already 18 months old. As an outsider in the process, though he showed a willingness to break the law, he was not as heavily invested as the BIDDER and the Board Member.

 

Final Cost to the Taxpayers

With the manipulation of the appraised value of the school and its surrounding 11.8 acres, the question naturally arises, “How much did this cost the taxpayers?”

 

A professional appraiser did a more recent evaluation of the property and school, and using school sale comparables in the immediate area, he came up with a much higher value for the Hillcrest School.

 

ROBERT A. FORREST, CREA SENIOR APPRAISER

Qualified and testified as a real estate expert witness before various state, county and local tax appeal boards in Alabama, Arizona, California, Connecticut, Florida, Idaho, Maine, Massachusetts, Michigan, New York, New Jersey, Pennsylvania, South Carolina South Dakota, West Virginia and Wisconsin.

Appraiser Valuation Indicators:

Cost Approach: $12,450,000

Income Approach: $11,650,000

Sales Comparison Approach: $11,320,000

Appraiser Indication of Market Value: $11,320,000

ERCSD Proposed Selling Price: $4,850,000

Difference in Value: $6,470,000  

 

[Read Steve Lieberman’s coverage of yesterday’s trial for The Journal News  here.]

 

Michael Castelluccio
www.preserveramapo.org

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