The Upheaval of Sheldon Solow
Daniel Geiger Aug. 8, 2012, 7 a.m.
A real estate executive who was formerly one of the top officers in the real estate empire of billionaire owner and developer Sheldon Solow has filed what is likely to be a multimillion-dollar lawsuit against Mr. Solow for unpaid retirement funds, The Commercial Observer has learned.
Steven Cherniak worked with Mr. Solow for 26 years before abruptly leaving Mr. Solow’s firm, Solow Realty and Development Company, in 2008. In a case filed in U.S. District Court on July 19, Mr. Cherniak alleges Mr. Solow dismissed him without cause and didn’t pay him a previously agreed-upon retirement package.
In his complaint, Mr. Cherniak describes his last days with the firm in December 2008 when, he asserts, without prior notice, Mr. Solow told him it was “time for [him] to leave.” Mr. Solow then seemed to vacillate, having associates call Mr. Cherniak several times through the weekend to tell him to return to the company. Mr. Cherniak said that by Sunday night, however, he was instructed to stay home, and he was not offered another chance to rejoin the company.
The next year, Mr. Cherniak requested his retirement benefit, an amount that is not revealed in his complaint, but was rebuffed by his successor at the company, an executive named James Yasser. In the claim, Mr. Cherniak points out that Mr. Yasser was eventually terminated by Mr. Solow by the end of 2009 and later filed an employment suit of his own for $1.6 million in unpaid wages that he said had been guaranteed when he joined Mr. Solow’s company.
Mr. Cherniak’s termination traces back to a turbulent period for Mr. Solow, long considered the real estate industry’s—and perhaps America’s—most litigious man.
During the depths of the downturn in 2008, Citibank liquidated more than $400 million in bonds that Mr. Solow had used as collateral against a roughly $500 million loan he had taken with the bank to acquire land on Manhattan’s East Side near the United Nations, where he planned a large complex of residential buildings. Disastrously for Mr. Solow, because the bonds were seized during the economic turmoil of the time, their value had dropped dramatically, and Mr. Solow was eventually forced to pay about $90 million more to Citibank in order to cover the balance of the loan (he sued unsuccessfully to avoid that payment, alleging that the bank had seized his bonds purposely at a point when their value had bottomed out).
The Commercial Observer twice called Mr. Solow’s office to both give him a chance to personally comment and also to request contact information for his media representative. Despite assurances that either Mr. Solow would be in touch or that a spokesperson would respond, neither Mr. Solow nor company representatives returned phone calls last week.
The recent suit appears to be the latest in a series of cases brought against a man who, throughout his long and successful career in real estate, was usually known to be the aggressor in litigation, not the defendant. Mr. Solow gained riches and fame in the city’s real estate industry by building 9 West 57th Street, a luxury office tower that charges some of the city’s highest office rents, as well as several high-class apartment buildings. But for all his acclaim as a visionary developer, Mr. Solow also became associated with the prolific pursuit of lawsuits against rivals, business partners, friends and even family. A quick search on court database systems reveals hundreds of cases (382 by one search) linked to Mr. Solow, data that appears to lend credence to his reputation.
“That’s an incredible number of cases to have been involved in,” said one attorney familiar with Mr. Solow’s history in the courtroom.
Early in his career, in 1957, Mr. Solow, who is now 83, was named in a lawsuit involving his mother, Jennie Solow, in what appears to have been an attempt to regain “real and personal property” awarded as part of a family joint venture, according to a legal synopsis obtained by The Commercial Observer.
Not helping Mr. Solow’s image, especially in a city and a real estate industry always eager for juicy gossip among its rich and famous, has been the fact that many of the cases he has been involved in became prominent suits of their day.
In the 1990s, Mr. Solow chummed the waters for those eager to sensationalize or criticize his behavior by entering into a years-long battle to try to wrest control of a house in the Hamptons from Hard Rock Cafe founder Peter Morton and others. Mr. Solow went so far as to hire a helicopter to fly over the property to surveil whether it was being maintained properly in order to try to make his case. In the end, he was unable to take possession of the property.
Mr. Solow has also sued former tenants of 9 West 57th Street, including prominent tenants Avon and Bank of America. Mr. Solow, who went after the two tenants over complaints they had failed to restore their space to the condition in which they received it, eventually won millions of dollars in compensation—an outcome that lent legitimacy to his claims, but also cemented fears among tenants and brokers that he was not only difficult to work with but potentially vindictive.
One of the more bizarre cases Mr. Solow became entangled with in recent years was an action in the mid-2000s against a collection of past and present owners of the office building 380 Madison Avenue. In that suit, Mr. Solow’s lawyer, the disgraced attorney Marc Dreier, who is currently serving a 20-year prison sentence for a $700 million scam in which he issued fake promissory notes—including forged debt he tied to Mr. Solow’s company—said Mr. Solow had been duped into overpaying for a leasehold of the property. The suit accused the defendants of concocting a decade-long scheme to delude Mr. Solow.
“We were just another victim in a Solow drive-by shooting,” said Jerome Katz, a partner at the firm Ropes & Gray who successfully defended brothers David and Frederick Barclay, former owners of the leasehold interest in the nearly one-million-square-foot building and defendants in the suit. “What can you say about a man like Sheldon Solow? He’s a professional litigant who engages in scorched-earth litigation tactics regardless of the merits.”
Mr. Katz represented his clients in a countersuit seeking compensation for their legal fees, in which they won what Mr. Katz said was one of the biggest sanctions ever awarded in the State of New York, about $1.3 million, a sum they only were able finally to collect in recent months.
“He took a variety of steps, procedural steps, making motions and frivolous appeals, asking for extensions, to delay having to pay out compensation we won over five years ago,” Mr. Katz said.
Supporters of Mr. Solow don’t deny that some of his cases have rested on shaky legal arguments or worse. These people say that he has fallen victim to bad legal advice and representation, including his long working relationship with Mr. Dreier.
“I think Sheldon was the victim of Marc Dreier and some other lawyers who charm and flatter him into saying yes to things he shouldn’t be saying yes to,” one attorney who has worked with Mr. Solow for years said. “I think Sheldon is really a wonderful guy; he’s a good guy who means well and who has been a target for a long time. In this business, you have to be tough and strong. It’s a shame he has the reputation that he has.”
Mr. Solow hasn’t helped his own case. Always known as an enigmatic and temperamental man, his increasing reclusiveness in old age has made him something akin to a Howard Hughes for the Manhattan real estate industry. In 2010, Mr. Solow ceased coming into his office at 9 West 57th Street for a period of months, and rumors began to swirl about his health. He eventually returned, and there was never an explanation for the episode. But losses like the Citibank and 380 Madison Avenue cases, and past rifts that are now coming to the fore, such as Mr. Cherniak’s suit, may have drained the characteristic fight and brashness that has defined Mr. Solow’s personality and style of doing business.
Tellingly, people who know him say, Mr. Solow has filed few, if any, lawsuits in recent years.
Not all has been bleak for Mr. Solow, however.
Last year, he hired an agency leasing team at 9 West 57th Street from the real estate services company Jones Lang LaSalle. The group’s lead executive, JLL broker Scott Panzer, has appeared to click with Mr. Solow, finally creating a reliable management and leasing team at a building that had seen a succession of brokerage companies hired and fired and, as a result, had accrued hundreds of thousands of square feet of vacancy in recent years. Last year, Mr. Panzer helped Mr. Solow renew the blue-chip investment companies Apollo Global Management and KKR, 9 West 57th Street’s two largest and most important tenants, for high-priced rents befitting the tower’s exclusivity.
“Sheldon appreciates honesty, and he embraces integrity and ethics,” Mr. Panzer said. “The legend is more intimidating than the actual man.”
Perhaps more importantly, Mr. Solow is now working with his son Stefan in handling his company’s affairs. For years, people who know Mr. Solow said that he insisted on controlling his real estate empire alone. Stefan’s participation may be a sign that he is finally cobbling together a sound succession plan.
And, so far at least, the younger Mr. Solow has shown none of his father’s tendencies as a bruiser in the courtroom.