AG Settlement with Pinnacle Group for Rent Overcharges

New York Daily News - http://www.nydailynews.com/ News probe helps put hit on Pinnacle BY JUAN GONZALEZ DAILY NEWS COLUMNIST Monday, December 18th, 2006
State Attorney General Eliot Spitzer, who launched a probe in September into allegations that Pinnacle Group LLC had illegally overcharged many rent-regulated tenants for apartment renovations, has reached a deal with the company, one of the city's biggest owners of rent-stabilized units.
Under the deal, Pinnacle will allow an independent investigator appointed by Spitzer's office to review all rent records for the company's nearly 20,000 rent-regulated units. The company agreed to repay any rent overcharges that the investigator uncovers, according to a source with knowledge of the negotiations.
As part of the agreement, which was still being finalized yesterday, Pinnacle will admit no wrongdoing. In addition, the company has agreed to pay $100,000 to the AG's office for the cost of the investigation, the source said.
The deal comes less than two weeks before Spitzer will leave office and be sworn in as governor.
The AG's probe and separate investigations of Pinnacle by the Manhattan district attorney's office and the state Division of Housing and Community Renewal were all launched after the Daily News revealed in a series of articles this year that Pinnacle had filed more than 5,000 eviction proceedings over the past two years against its tenants - nearly one for every four apartments it owns.
The News investigation also found many cases where Pinnacle had inflated the costs of its repairs for vacant apartments and then doubled or tripled monthly rents far above what rent laws allow.
The company's aggressive tactics spawned widespread opposition and numerous protests during the past year from many of its tenants as well as from political leaders and housing advocates in Harlem, Washington Heights and the Bronx, where the bulk of Pinnacle's housing stock is located.
"We are not in a position to comment on any aspect of the review by the attorney general's office at this time," said a spokesman for Pinnacle last night. "The Pinnacle Group, however, has been cooperative throughout this process."
But some tenant groups who heard of the settlement yesterday called it a slap on the wrist to a huge company.
"This agreement is too nice to Pinnacle," said Luis Manuel Tejada, a spokesman for the Mirabal Sisters Cultural Center in Washington Heights. "You just can't tell them to return rents they've overcharged to tenants without also penalizing them for violating state housing laws."
"It sounds like it's, 'Let's pay it off and let the whole thing go away,'" said Kim Powell, of Buyers and Renters United to Save Harlem. "This agreement does nothing about the massive eviction proceedings or poor management procedures at Pinnacle. It's only a part of the problem being solved."

Read Agreement:


ATTORNEY GENERAL OF THE STATE OF NEW YORK
COMMISSIONER OF THE NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL
In the Matter of
PINNACLE GROUP NY, LLC
ASSURANCE OF DISCONTINUANCE PURSUANT TO EXECUTIVE LAW § 63 (15)
PURSUANT to the provisions of Article 22-A of the New York General Business Law and Section 63(12) of the New York Executive Law, Eliot Spitzer, Attorney General of the State of New York ("the Attorney General"), and Judith Calogeio, Commissioner of the New York State Division of Housing and Community Renewal ("DHCR"), pursuant to Rent Stabilization Law, Unconsol. Laws Section 26-S16, caused an inquiry to be made to determine whether certain persons or entities have been or are engaged in wrongful practices or illegal acts concerning certain rent-stabilized properties and apartments owned or managed directly or indirectly by Pinnacle Group NY, LLC and/or its current or former affiliates and subsidiaries (collectively, "Pinnacle") with respect to the computation of rent increases for vacated apartments based upon the costs of improvements to those properties and apartments during the four-year period between December 15,2002, and December 15, 2006 ("the Inquiry").
WHEREAS, on or about August 29,2006, the Attorney General and DHCR served a subpoena on Pinnacle, seeking certain documents in connection with the Inquiry; and
WHEREAS, Pinnacle has cooperated in the Inquiry by producing responsive documents; and
WHEREAS, Pinnacle is committed to complying with all applicable laws and regulations, and has advised the Attorney General and DHCR of Pinnacle's desire to resolve the Inquiry; and
WHEREAS, Pinnacle has undertaken and will undertake certain actions, set forth below, to ensure that its accounting for and allocation of the expenses it incurs in improving the apartments and properties it owns are accurate, and that any rent increases which are set based on such improvements and/or based on other appropriate factors are correctly and lawfully computed; and
WHEREAS, the Attorney General and DHCR find the actions set forth below to be undertaken by Pinnacle, appropriate and in the public interest; and
WHEREAS, Pinnacle believes that it is, and at all times, has been, in compliance with New York law, and Pinnacle has cooperated fully with the Attorney General and with DHCR throughout this Inquiry; and Pinnacle is entering into this Assurance of Discontinuance ("Assurance11) so that this matter may be resolved amicably, without further cost or inconvenience; and
WHEREAS, Pinnacle is willing to enter into this Assurance without admitting that it has violated any law, or that it otherwise committed any wrongful or improper act, and the Attorney General, pursuant to Section 63(15) of the New York Executive Law, is willing to accept this Assurance in lieu of commencing any statutory proceedings, and DHCR is willing to accept this Assurance in lieu of commencing any further overcharge proceedings on its own initiative, IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES
1. THAT this Assurance shall be binding on, and apply to, Pinnacle Group NY, LLC, its affiliates, subsidiaries and all of their current and former officers, directors, employees, and agents, and any partners of any of them, as well as any successors in interest to any of them

2. THAT for all rent-stabilized apartments owned or managed by Pinnacle, Pinnacle will comply with all applicable laws including but not limited to the Rent Stabilization Law, Local Law 1969, No. 16 of the Administrative Code of the City of New York ("RSL") and regulations thereto, as they may be from time to time modified, including but not limited to:
(a) RSL §§ 26-511 and 26-512 and 9 N.Y.C.R.R. §§ 2522.1 and 2521.1 incalculating the rents charged for rent-stabilized apartments owned or managed by Pinnacleimposed as a result of individual apartment improvements and major capitol improvements andnot imposing rents in excess of the permissible limits;
(b) RSL §26-517(f) and 9N.Y.C.R.R. §2528.3 by registering with DHCR the rent amount for each rent-stabilized apartment owned or managed by Pinnacle each year; and
(c) 9 RY.C.R.R § 2522.5(c) by attaching a rider to the leases of tenants of rent-stabilized apartments owned or managed by Pinnacle who sign a vacancy lease, which rider states, in relevant part, the amount of the prior legal regulated rent, if any, and how any increased rent was calculated, as well as a statement that the increased rent was calculated pursuant to the Guidelines of the Rent Guidelines Board and the Rent Stabilization Code.
3. THAT Pinnacle has retained a forensic accounting and investigative firm acceptable to the Attorney General and to DHCR, Forensic Investigative Associates ("FIA"), which will, within one hundred eighty ( 180) days of the execution of this document by the Attorney General and by DHCR audit all rents set by Pinnacle for the four year period between December 15,2002, and December 15,2006, for each rent-stabilized apartment owned or managed by Pinnacle which was vacated within that four year period; and
(a) Should FIA find any rent that cannot be justified based on statutory increases and/or documented improvements and/or other applicable provisions of law, Pinnacle will credit to the tenant (or refund to the fonner tenant) the amount of the overcharge plus interest calculated in the manner approved by DHCR, no later than thirty (30) days from completion of the audit;
(b) For each apartment for which a rent overcharge is identified, Pinnaclewill, no later than thirty (30) days from completion of the audit, revise Pinnacle's rent records toconform with the correct rent as determined by FLA, provide current tenants of those apartmentswith written notice of the lawful stabilized rent, amend tenants' leases, as appropriate, and file with DHCR an amended and superceding rent registration statement for each apartment wherethe rental contained in the current registration statement exceeds the lawful rent as calculated by FIA;
(c) If there are tenants to whom refunds are owed as a result of this audit whocannot be readily located, Pinnacle will take all reasonable steps, as agreed by the AttorneyGeneral and DHCR, to locate the tenants. At a minimum, these efforts shall include Pinnaclesending each such former tenant at his or her last known address a copy of the notice that arefund is due the tenant and of the procedures for obtaining the refund. Pinnacle shall pay therefund due a former tenant within 30 days of receiving a request from such former tenant or hisauthorized representative or within 30 days of learning of the former tenant's currentwhereabouts, hi the event that any of these tenants cannot be located. Pinnacle will maintain themonies for their refunds in an escrow account for one year. After that time has elapsed, if thetenants' whereabouts remain unknown, these funds will be disbursed in a manner agreeable tothe Attorney General and DHCR; and
(d) Within 90 and 180 days from the date of the execution of this Agreement, Pinnacle shall provide the Attorney General and DHCR with verified compliance reports in the form of an affidavit stating in detail (he steps and procedures taken or instituted by Pinnacle to comply with the terms of this Assurance. The compliance report shall include the following:
i. the amount of rent overcharges refunded to each current and former tenant;
ii. copies of all letters or notices sent to tenants pursuant to this Assurance and a description of all efforts made to locate tenants entitled to refunds;
iii. copies of all revised rent records showing the correct rent amounts as calculated by FIA;
iv. copies of all notices provided current tenants of those apartments of the lawful stabilized rent;
v. copies of leases amended as provided in para. 3(b) above; vi, copies of all superseding rent registration statements filed with DHCR pursuant to paragraph 3(b) above;
vii. such additional supporting documentation as the Attorney General requests to demonstrate that FlA's calculation of revised rents and/or overcharges was justified;
h. the name of the financial entity holding the escrow account and an accounting of the funds contained therein; and
i. a copy of FlA's audit report (included in the second compliance report).
The compliance reports shall be sent to Assistant Attorney General Herbert Israel,Consumer Frauds Bureau, Office of the Attorney General, 3rd Floor, New York. New York 10271 or such other person as may be designated by the Attorney General; and Office of General Counsel, Division of Housing and Community Renewal, 25 Beaver Street, 7th Floor, New York, New York 10004 or such person as may be designated by the Commissioner.
4. THAT FLA will also review and approve Pinnacle's current procedures forcomputing rents on newly vacated apartments:
(a) If any of Pinnacle's procedures are found not to be in compliance withapplicable law and DHCR regulations, Pinnacle will promptly implement the recommendationsof FIA for revised procedures; and
(b) For a period of one year from the date of the signing of this Assurance,FIA will monitor Pinnacle's ongoing compliance with the approved procedures for tracking thecosts of renovating individual apartments and for setting rents on newly vacated apartments
5. THAT this Assurance concludes the Inquiry brought by the Attorney General andby DHCR and any action that the Attorney General or DHCR could commence against Pinnacleoi any of its current affiliates or subsidiaries, or any of their current or former officers, directors,shareholders, employees, and agents, and any partners of any of them, arising from or relating tothe subject matter of this Assurance; provided however, that nothing contained in this Assuranceshould be construed to preclude claims by the Attorney General or by DHCR to enforcePinnacle's obligations arising from or relating to the provisions contained in this Assurance.
6- THAT no amendments, modifications or variations of the terms of this Agreement shall be valid unless made in a writing executed by both Parties.
7. THAT this Agreement shall apply to and inure to the benefit of the Parties and their respective successors and assigns, parents, subsidiaries, affiliates, predecessors, present and former directors, officers, shareholders, members, partners, employees, representatives and agents
8. THAT this Agreement contains the entire agreement and understandingconcerning the subject matter hereof between the Panics, and supersedes and replaces all priornegotiations, representations, promises, proposed agreements and agreements, written or oral
9. THAT nothing contained herein shall be construed so as to deprive anyindividual of any remedy under the law including the right of any tenant or former tenant to filean overcharge complaint with DHCR with respect to the subject matter of the Inquiry arid forDHCR to adjudicate it in accordance with the RSL and Rent Stabilization Code. This Assuranceshall not confer on any person any tights as to a third party beneficiary or otherwise againstPinnacle.

10. THAT the parties represent and warrant that their signatories to this Assurancehave authority to act for and bind the respective parties.
11. THAT the acceptance of this Assurance by the Attorney General and by DHCRshall not be deemed or construed as an approval by either of any of Pinnacle's past practices.
12. IT IS FURTHER UNDERSTOOD AND AGREED THAT Pinnacle shall payto the Attorney General the sum of $ 100,000.00 as costs of this investigation pursuant toExecutive Law § 63(15).

WHEREFORE, the following signatures are affixed hereto this 18) day of December, 2006
ELIOT SP1TZER
Attorney General of the State of New York
120 Broadway
New Yodrl^ 027,1-0332
Francine James
Assistant First Deputy Attorney General
-
JUDITH CALOGERO
Commissioner of the New York State Division of
Housing and Community Renewal 25 Beaver Street,,?"1 Floor New Yoi k, Ne^York 10004 ,
s .'• ,' , V Si <~- V •'"> / !'By: / ^ Z_________

Viewers are advised if they would like a copy go to www.oag.state.ny.us