July 2, 2022

McKenzielee Blog

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Mitch Kossoff Pleads Guilty to Defrauding Real Estate Clients

3 min read

Mitch Kossoff

Real estate attorney Mitch Kossoff admitted in a Manhattan courtroom Monday to defrauding clients over a period of three years. It closes a chapter on a curious scandal that has unfolded by bits and pieces since Kossoff went AWOL eight months ago and $14 million went missing from escrow accounts.

“I defrauded multiple clients of my law firm,” Kossoff said in copping to three charges of grand larceny and one for scheming to defraud. He faces up to 13 and a half years in prison but remains free pending his sentencing, which is scheduled for April 6.

A handful of friends were in court to lend moral support to the disgraced lawyer, who wore a black sweater, black jeans and black Doc Martens with bright yellow threading. In a bit of gallows humor, he mentioned wanting the Yankees to win another World Series but that he might not be able to see it.

Kossoff, 68, had dropped out of sight in April, prompting panicked inquiries by clients of the prominent real estate attorney about the whereabouts of the millions of dollars he was entrusted to hold. Details on the location of the money were not disclosed in court Monday.

The crime threw Kossoff’s law firm, Kossoff PLLC, into bankruptcy, the proceedings of which have been hampered by the refusal of Kossof and his attorney to hand over documents to the trustee tasked with unwinding the practice’s accounts.

When he did appear for bankruptcy hearings via video conference, Kossoff kept his computer’s camera turned off.

Kossoff’s criminal defense attorney, Walter Mack, argued that since his client was under criminal investigation, turning over the requested documents would violate his Fifth Amendment rights. The bankruptcy judge in November found Kossoff in contempt of court and told him he could avoid jail by handing over the requested paperwork.

About a week later, Kossoff agreed to turn himself in and plead guilty to charges brought by Manhattan District Attorney Cyrus Vance.

According to the charges, clients including Allen Gross’ GFI Capital Resources and the Laboz family’s Urban American Land gave Kossoff large amounts of money to hold in escrow accounts, to be released at their direction.

Experts told The Real Deal that these kinds of accounts can be dicey. Clients hand over sizable sums based almost entirely on their trust of the attorney. But as the Kossoff case proved, those funds can easily be misused.

Most law firms put controls in place to protect against abuses. Many escrow accounts, for example, require authorization from two signatories in order to relinquish funds. At single-practitioner law firms like Kossoff’s, though, often just one person controls millions of dollars in those accounts.

Kossoff is well known in the real estate industry, particularly with owners of large rent-stabilized multifamily portfolios such as Steve Croman of 9300 Realty, Terrence Lowenberg and Todd Cohen’s Icon Realty Management and Larry Gluck’s Stellar Management.

He was regarded as an expert on the state’s rent regulation laws and used his knowledge of the system’s intricacies to benefit his clients.

In his spare time, Kossoff taught a spin class at a gym near his office near City Hall. Some of his clients were frequent participants in the exercise sessions.

As his scandal unfolded, it became clear that the attorney had been struggling financially for some time before he cut off communication with his clients and employees in April. As early as the summer of 2020, Kossoff began taking out millions of dollars in merchant cash advances, basically a corporate version of a payday loan, for which he agreed to pay back at a high cost.

Kossoff’s 94-year-old mother accused him in court papers of forging her signature on some of the loan documents.

His disappearance not only rattled clients, but left his colleagues and staff out to dry. The firm, which employed about 30 attorneys, folded overnight.

https://therealdeal.com/2021/12/13/mitch-kossoff-pleads-guilty-to-defrauding-real-estate-clients-faces-13-years/

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