They decided that the project would be more attractive if converted to low-income housing. Goodin applied for tax credits from the Ohio Housing Finance Agency and went looking for a buyer.
Two Southern California syndicators surfaced. First, Goodin negotiated with Michael Leone of San Diego, but their deal was never finalized. With time running out late in 1990--the tax credits would expire by year's end--he turned to Lefkowitz.
On Dec. 30, Lefkowitz flew to Columbus. He quickly agreed to buy the project and another in Delaware, Ohio. But Goodin's partners, Les Compson and Paul and Ray Bouman, soon learned of one peculiarity of the sale: Citi Equity would take over the project and collect $80,000 a month in rent for several months before the closing.
They had good reason to worry. The sale was not closed on schedule, and Leone filed suit alleging that he had a valid contract on the property.
The suit, though later dismissed, clouded the property's title. Meanwhile, Goodin and his partners were personally on the hook for $5.8 million in loans. But with no access to the property and its cash flow, they could not pay the bank and their subcontractors.
Unable to raise capital, the Boumans were forced to sell a Chevrolet dealership that they had owned for 20 years. They also were forced to sell another property and fight off foreclosure on their homes.
"This put a big, black cloud over our lives," said Paul Bouman.
The partners sued Lefkowitz; in early 1992, an Ohio judge gave Citi Equity 120 days to complete the sale. The afternoon before the deadline, Goodin killed himself.
The sale did not close as scheduled, and the Bouman group later filed another suit. Although the property had been occupied by tenants for two years, Lefkowitz replied that he did not complete the purchase because the property was shoddy.
"What they built is a piece of junk and that's the problem," Lefkowitz testified in a deposition in January.
But in his deposition, Schwartz said that claim was just a ruse by Lefkowitz to delay closing because he lacked financing. "Mr. Lefkowitz was proud of the property," Schwartz testified. "He kept referring to it as a brochure property--to take a picture of it, put it on a brochure."
In March, an Erie County jury ruled in favor of the Boumans, awarding them a $7.2-million judgment against Citi Equity and Lefkowitz. They still are trying to collect; Citi Equity was forced into bankruptcy reorganization the day after Lefkowitz's indictment.
*
When an FBI agent contacted Paul Bouman in May, 1993, the developer learned that he was not alone in fighting Lefkowitz. According to Bouman, the agent told him that Citi Equity had left a trail of ruined developers across the country.
Roger Johnson, owner of Citadel Construction of Spokane, Wash., was not paid for work on projects in Spokane and Boise, Idaho. The company recently won a $2-million award from Citi Equity in arbitration hearings--an award that the firm hopes to collect by foreclosing on the projects.
"Lefkowitz came close to driving Citadel out of business," said the firm's attorney, Lyn Rassmussen.
In Elk River, Minn., developer John Welcht built and sold the 51-unit Park Pointe Apartments to Citi Equity, but despite a court judgment, he never collected the $1.3 million that he was owed on the sale. Citi Equity avoided foreclosure on the project by putting its operating limited partnership in bankruptcy reorganization. In all, 21 Citi Equity projects have filed for Chapter 11 bankruptcy.
All together, about 25 properties that Lefkowitz syndicated were not completed, according to bankruptcy court records.
In Maumee, Ohio, a suburb of Toledo, developer Ken Minichiello said he boarded up a project that was 80% complete because Citi Equity owed him $3 million.
"We are in a very tenuous situation," said Minichiello, owner of Commonwealth Construction. "I could be forced into bankruptcy."
The stalled project means that 160 needy Toledo-area families are being denied affordable housing in an area where several thousand are on waiting lists for public housing or subsidized rental units.
"The demand for low-income housing is overwhelming," said Donald Troendle, executive director of the Lucas (Co.) Metropolitan Housing Authority.
Investors in the Maumee project also are in jeopardy. The indictment alleges that Lefkowitz improperly dispensed tax credits before the project was finished. An Internal Revenue Service spokesman said investors could be forced to repay any credits taken, along with interest and penalties.
Barbara Batman, a retired piano teacher from Hudson, Ohio, invested $60,000 in three Citi Equity projects. Interest payments on all three projects stopped in March.
While Batman's financial security is not dependent on these investments, their loss would be painful. "I'm hoping it will work out all right," she said. "I don't like to give my money away."
