UPPER EAST SIDE — Mayoral hopeful George McDonald and his wife have quietly settled a court case in which they were accused of taking out nearly $1.5 million in mortgage loans in her dad's name and forcing him out of their luxury brownstone.
Barbara Spector-Karr, the second wife of McDonald's father-in-law, Emanuel Karr, claimed in a legal filing last August that the GOP contender and his wife used the money to buy a vacation home on Long Island.
She also suggested that the couple forced Karr out of his pad in the Upper East Side building he co-owned with them and into a rent-controlled walk-up with a dangerous stairwell.
Karr died at 97 in 2011 after suffering a fall on the new apartment's stairs, she said.
In the settlement inked two weeks ago, the McDonalds, who founded the nonprofit the Doe Fund, agreed to pay $71,000 to Spector-Karr’s three children. For their part, Spector-Karr’s family tamped down on the allegations that the McDonalds had a role in Emanuel Karr’s death.
“The Spectors represent that it was never the intention in the [proceeding], or in any other context, to suggest that the McDonalds took any action that caused Manny’s death,” they said in the settlement.
The Spectors also agreed in the settlement that they wouldn’t discuss the case with the media.
The focal point of the legal fight was the East 84th Street brownstone that McDonald and Emanuel Karr bought together in 1989.
Karr, a court reporter who had wisely invested his income during his career, went in on the deal because he believed in his son-in-law’s plan to start the Doe Fund, a city nonprofit that helps the homeless find jobs and affordable housing.
At the time Karr plunked own $250,000 toward the purchase, while McDonald contributed $30,000, according to Spector-Karr’s filing in Manhattan Surrogate’s Court.
Under a partnership agreement, Karr owned 89 percent of the Brownstone while McDonald and his wife, Harriet Karr-McDonald, held the remaining 11 percent, the filing says.
Karr and his then first wife, Frances, lived on the second floor of the brownstone. The McDonalds resided on the first floor and used the third and fourth floors for the Doe Fund’s headquarters.
Karr lived in the brownstone until Frances died, but relocated when he remarried in 1995. Spector-Karr said it was a move he shouldn’t have made.
“Emanuel, unfortunately for him, did not insist on continuing to exercise that right [to reside in the brownstone] — a failure that ultimately resulted in his death,” Spector-Karr said.
“After Frances’ death in November 1993 and shortly before his remarriage to [Spector-Karr] in September 1995, rather than put pressure on Harriet and George, Emanuel moved out of the brownstone and into [Spector-Karr’s] very far from luxurious rent-controlled second-floor walk-up apartment.”
Karr died on March 1, 2011, from injuries he suffered during a fall down the stairs at the new apartment a few months earlier, according to the filing.
Spector-Karr, the executor and a beneficiary of Karr’s estate, filed a petition in August 2012 demanding information on money she accused the McDonalds of wrongfully withholding from him.
She claimed that before his death, the McDonalds obtained power of attorney over Karr. They then got nearly $1.5 million from mortgage loans against the Upper East Side brownstone. That money paid for the McDonalds’ vacation home in Bayshore, Long Island, the filing says.
Spector-Karr argued that since her husband owned 89 percent of the brownstone, the McDonalds owed his estate $1.33 million, or 89 percent of the value of the loans.
The McDonalds responded in a legal filing, calling the claims frivolous and denying that Karr’s estate had any right to money from the loan.
They said in their filing that since the purchase of the brownstone, they have managed the property and paid its mortgage, taxes and maintenance fees. Karr also agreed that the ownership interests would adjust over time as their contributions increased, they said.
The McDonalds’ added that Karr always intended to leave his share of the brownstone to his daughter.
As for Karr’s move, the McDonalds claimed that he wanted to leave the brownstone when he remarried.
“Karr was pleased to be taking advantage of the value the rent-controlled apartment offered and was very satisfied with this living arrangement,” they said in their filing.
They added that Karr’s new digs were on the second floor — just like at the brownstone.
Spector-Karr died at age 81 in January, but her three children continued the case until the settlement was reached. In the settlement, the McDonalds also reiterated their denials of the allegations.
An attorney for Spector-Karr's family declined to comment.
In a statement to DNAinfo New York, the McDonald campaign said, "George and Harriet loved and dearly miss Manny since his passing at 97 years of age.
"Manny was tremendously proud of all that George and Harriet had accomplished together and the baseless claims brought against the McDonalds are simply sad and unfortunate."