Order Temporarily Bars Developers From Selling Interests In The Timeshare Pending Fraud Investigation; Freezes Assets And Bars Targets From Foreclosing On Defrauded Purchasers
Schneiderman: Purchasers Duped Into Paying Tens Of Thousands Of Dollars To Become Owners; Later Denied Benefits Of Ownership In Alleged Bait-And-Switch Scam
NEW YORK – Attorney General Eric T. Schneiderman today announced that he obtained a court order halting sales of timeshare interests at the Manhattan Club, a luxury hotel in Midtown Manhattan. The order by a Manhattan Supreme Court Justice requires that the club’s principals, Ian Bruce Eichner, Leslie H. Eichner, and Stuart P. Eichner, testify in court about the club’s practices and produce documents to the Attorney General’s Real Estate Finance Bureau about allegedly fraudulent sales tactics. The order also bars the corporations through which the club and the developers act from draining bank accounts connected to the hotel during the investigation. The Manhattan Club is further barred from foreclosing on timeshare purchasers, who the Attorney General alleges were lured into investing with false promises.
The Attorney General’s investigation was spurred by complaints from people who paid tens of thousands of dollars to become Manhattan Club “owners” but have been unable to make reservations due to a claimed lack of available rooms by the hotel’s operators. At the same time, rooms in the Manhattan Club are being rented over the internet to the general public. About 14,000 people currently own timeshares in the hotel’s 286 suites.
“When sellers use high-pressure tactics to sell timeshares, consumers should be wary that they may not be getting what they were promised. We allege that the Manhattan Club, near New York City’s iconic Carnegie Hall, is a particularly stark example of such a bait-and-switch timeshare scheme,” Attorney General Schneiderman said. “We will use all the tools at our disposal to protect customers from unscrupulous scammers and predatory businesses and hold New York developers to the promises they make, whether orally, in their sales pitches or in their formal offering plans.”
The Manhattan Club’s website bills the 200 West 56th Street accommodation as a “unique” “residence-style boutique hotel” that blends “a vacation ownership retreat with a luxury suite hotel” and that offers “a hard-to-find haven in the midst of this active city.” The website appeals to people who “frequently visit New York City to enjoy Broadway theatre, fine dining and shopping, [and] classical performances.”
In April and May, the Attorney General sent undercover investigators to record the Manhattan Club’s “Vacation Ownership Experience” sales presentation, held at the club. As alleged in court papers filed by the Attorney General’s office, investigators found evidence indicating that the Manhattan Club’s sales tactics amounted to a bait-and-switch scheme. Prospective purchasers were baited by a relentless sales pitch that includes a number of misleading promises, including that ownership in the Manhattan Club is “better than money in the bank.” Prospective buyers were also allegedly told that the club does not rent rooms to the general public, that reservations are easy to make, and that few restrictions apply to reservations by owners.
The papers alleged that the switch comes after a purchase agreement is signed, when a new owner learns from an offering plan -- which was illegally withheld prior to the purchase -- about the difference between what they were promised in the sales presentation and what they actually bought. For example, contrary to the club’s explicit promises, room availability to owners is limited by the renting of rooms to the general public. That means that all reservations are subject to availability and owners, in some cases, have not been able to use any of the time they purchased. Further, the owners’ annual common charges have jumped approximately 200% in the last ten years-- to about $2,000 per ownership interest per year. Some frustrated owners have sold their ownership interests back for a mere $1, just to escape the burdens of paying these charges.
Issued pursuant to General Business Law section 354, a provision of New York’s Martin Act that confers broad powers on the Attorney General to investigate and halt fraud, the court order bars the Manhattan Club from selling timeshare interests, prevents them from withdrawing money from certain bank accounts, and stops them from foreclosing on Manhattan Club purchasers during the pendency of the investigation. The order also compels the Manhattan Club’s principals, Ian Bruce Eichner, Leslie H. Eichner, Stuart P. Eichner to testify about the club’s practices.
Other respondents named in the order, agents and corporations involved in the club’s operations, are Scott L. Lager, T. Park Central LLC, O. Park Central LLC, Manhattan Club Marketing Group LLC, and New York Urban Ownership Management LLC.
A copy of the court order can be viewed here.
For information about timeshare, home improvement and vacation scams and how to protect yourself, click here for the Attorney General’s brochure “Don’t Get Burned: Attorney General’s Guide To Protecting New Yorkers From Summer Scams.”
Deputy Chief Investigator John McManus from the Attorney General’s office is the lead investigator assigned to this case. The Investigations Bureau is led by Chief Investigator Dominick Zarella. Sylvia Rivera, Karon Richardson, Louis Carter, Richard Friedman and John Serrapica, all of the Investigations Bureau, also assisted in the investigation.
This case is being handled by Assistant Attorney General Serwat Farooq, Deputy Chief Andrew H. Meier, and Bureau Chief Erica F. Buckley, all of the Real Estate Finance Bureau, as well as Executive Deputy Attorney General for Economic Justice Karla G. Sanchez. Law Interns Jessica Eng and Robert Volynsky also assisted in the investigation.