Witness at the Center of Malcolm Smith Bribery Case Owes $126M to Citigroup
By DNAinfo Staff on April 3, 2013 1:57pm |
NEW YORK CITY — The cooperating witness who was instrumental in the alleged bribery plot that took down state Sen. Malcolm Smith, a Queens councilman and city GOP bosses is a bankrupt, smooth-talking real estate investor who personally owes a staggering $126 million to Citigroup, DNAinfo.com New York has learned.
Moses "Mark" Stern, 40, brokered the backroom deals that involved $80,000 in cash payoffs and a scheme to get the Democratic senator on the Republican ticket for this year's mayoral race, according to sources.
His sweet-talking and negotiations led to Tuesday's arrests of Smith, Councilman Dan Halloran, Bronx Republican party head Joseph Savino, Queens GOP vice-chairman Vincent Tabone and two Rockland County officials. In the criminal complaint against the six defendants, Stern is never identified but only referred to as the cooperating witness, or "CW."
Stern seems to have a knack for the art of persuasion. In the spring of 2007, at the height of the real estate bubble, the Monsey, N.Y., resident got Citigroup to give his firm First Republic Group Realty $126 million in mortgage loans to buy 11 strip malls in the Southeast, despite his spotty track record on investments, according to court records.
First Republic bought the properties for $128 million but went bankrupt in 2009. That same year Citigroup sued Stern, claiming he was on the hook for all the money.
The failed real estate deal also led to federal fraud charges in 2010 against the escrow agent involved in the loan transaction, according to an indictment in Manhattan Federal Court. The escrow agent is accused of lying about paying millions of dollars in closing costs..
Stern does not appear to have ever been charged. But the criminal complaint against the six political figures says the cooperating witness pleaded guilty on March 11.
Smith's attorney, Gerald Shargel, released a statement on Wednesday questioning the use of Stern as the confidential witness. "Yesterday the U.S. Attorney made it seem the roof had been blown off the presumption of innocence," Shargel said. "Now 24 hours later we're seeing the case is based on a shaky foundation."
The politicians involved knew the cooperating witness as "Mo" Stern, a politically connected real estate developer, according to sources. He also claimed to be rabbi, lending him him an air of credibility and integrity.
According to a 2010 Forbes article, Stern claimed that his business mentor was the late Mexican billionaire Isaac Saba Raffoul. He told the magazine that in the early 1990s, he ran a clothing import business.
Court records show that two of Stern's companies, Grupo Xtra and Clothestime Stores, filed for bankruptcy in the early 200s.
One source described Stern as "a good businessman" but untrustworthy.
"You know the saying, when you shake his hand, when you pull your hand back, check to see if all your fingers are there," the source said.
Stern, who is reportedly married with nine children, owns two properties next to one another in Monsey. One is a rundown two-story home with a two-car garage, while the other is a brick mansion that is currently under construction.
Affixed to the front door of the mansion was a termination of water service for a past due bill of $616.46.
People who answered the door on Tuesday night and Wednesday at the addresses declined to comment. A masseuse was seen leaving the mansion early Tuesday afternoon.
In a response to Citigroup's civil filing, Stern said in an affidavit that he didn't owe the banking giant a dime because it bought First Republic — and its 11 properties — for $1,000 at a public auction in.
He claimed the properties were valued at $140 million and brought in annual profits of $5 million. Still, Citigroup won a judgment against him for all the money.
A lawyer who represented Stern in the civil action recently won a judgment against him for unpaid legal fees.
Stern's work as a cooperating witness with federal investigators dates back to at least Aug. 5, 2011, when he and the Spring Valley, N.Y., Mayor Noramie Jasmin discussed him obtaining a parcel of town property to develop, according to the criminal complaint.
The real estate project led to the arrests of Jasmin and her deputy, Joseph Desmaret, on fraud charges Tuesday. Stern went on to wheel and deal on behalf of Smith in his efforts to bribe Halloran and the party bosses for their blessing to run on the GOP ticket, according to the criminal complaint.
Additional reporting by Leslie Albrecht