Belvedere sales could be halted due to possible fraud

August 13, 1991|By Edward Gunts

More than 50 pending sales in the Belvedere condominiums could be halted at least temporarily if a U. S. bankruptcy judge grants a motion filed by a Baltimore attorney who claims the sellers may be defrauding the court.

In a motion filed this month, the attorney, Kenneth Davies, asked the court to prevent any more settlements until he has a chance to complete an investigation involving Belvedere Realty Corp., a New York-based group that bought the hotel last spring for $3.8 million and began marketing it as condominiums.

Mr. Davies, a partner of Wright, Constable & Skeen, is the court-appointed trustee for One East Chase Street Associates Limited Partnership, a group headed by Victor Frenkil, a Baltimore businessman who once owned the Belvedere. Mr. Frenkil's group lost control of the property last year when it was sold at a foreclosure sale on behalf of a group headed by Meritor Savings Bank. The Frenkil group previously had filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.

In his filing, Mr. Davies said that he believes Belvedere Realty Corp. may be affiliated with the Hertz Group Inc., a California corporation that backed out of a contract to buy the hotel for $5.54 million last fall. In December, Bankruptcy Judge James Schneider ordered the Hertz Group to proceed with the purchase, but it did not. At that time, Judge Schneider said it would be "reprehensible" for Judah Hertz of the Hertz Group or any of his associates to try to buy the hotel at a lower price after backing out of the original contract.

That is what Mr. Davies believes may have happened.

"The trustee believes the acquisition of the property by Belvedere Realty Corp. is tainted by fraudulent and inequitable conduct, including interrelationships between the principals of BRC and the Hertz Group and presentation of misleading and inaccurate testimony at a hearing before this court," the motion states.

Neither Mr. Hertz, who is a developer, nor his attorney, David Fishman, could not be reached for comment yesterday. According to a court clerk, Judge Schneider has not acted on Mr. Davies' motion.

The filing came just as the principals of Belvedere Realty have begun settling on the first of 63 residential units put under contract since last spring, a figure that made the project one of the fastest-selling in the area during the first half of 1991.

Elliott Sharaby, head of Belvedere Realty, could not be reached for comment, but sales associates say settlements are proceeding as scheduled. Mr. Sharaby has said from the beginning that his group has no connection to Mr. Hertz's.

In his filing, Mr. Davies lists a number of signs that he believes show a connection between Belvedere Realty and the Hertz Group, which is not related to the Hertz rental car company. For example, he said:

* Hertz planned to borrow money from Home Savings Bank of Florida when it was negotiating to acquire the hotel. Belvedere Realty borrowed money from the same bank in March.

* Both Hertz Group and Belvedere Realty retained David Fishman, an attorney with Gordon, Feinblatt, Rothman, Hoffberger and Hollander in Baltimore. According to Mr. Davies, Mr. Fishman no longer works for BRC but does still represent the Hertz Group.

* Both parties are affiliated with Walter Nicholson, a Texas broker who worked with Mr. Hertz when he was negotiating to buy the hotel last fall and who is now a director of Belvedere Realty.

Another sign that Mr. Hertz and Mr. Sharaby may be working together, court documents say, is that Mr. Sharaby signed a check last October for appraisal services involving the hotel that were commissioned by Mr. Hertz.

Also, "individuals employed by Hertz when the parties were proceeding to closing . . . are present on the property and participating in the sales, marketing and renovation of the property by BRC," the motion states.

These and other connections led the trustee to believe that Mr. Hertz and his associates "acted to circumvent the court order, defraud the estate and acquire the property for a cost less than the price negotiated in the purchase agreement and that they intend to convey all or a part of the property for a profit," according to the court documents.

Mr. Davies said that he asked the court to halt the sales because he wanted to keep Belvedere Realty's assets intact and "within reach" in case the court determines that the Hertz Group has defrauded the court.

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