GLENS FALLS - A fourth foreclosure lawsuit covering six different parcels has been filed against companies affiliated with developer Charles Cefalu and his mother, Sophie.
A Lake Placid-based investment firm says two companies managed by Sophie Cefalu - Medical Resources LLC and SBC Properties LLC - owe a combined $550,000 on multiple mortgages totalling that same amount.
In 2008, Placid Management Opportunities LLC acquired two pre-existing mortgages for properties that Medical Resources and SBC Properties bought in 2005.
Also in 2008, Placid Management gave the same firms two new loans for the purchase of additional buildings.
The parcels in question are residential and commercial rentals at 10, 12 and 14 School St.; 86 South St.; 10-12 New Pruyn; and 22 Broad St.
Placid Management's attorney, Kenneth Schwartz of Latham-based Farer & Schwartz, said Tuesday that the companies had made interest-only payments on the loans leading up the default, which is why the entire principal amount is still outstanding.
The lawsuit is the latest in a string of foreclosure actions brought against limited liability companies tied to the Cefalus.
Three earlier lawsuits, filed between May 1 and July 9, claim that SBC Properties, Medical Resources and Canfield Properties LLC owe a combined $1.66 million on the Crandall Square Condominiums and other Glens Falls buildings.
Who is running the show?
Sophie Cefalu is named in all foreclosure lawsuits as having signed for the mortgages as the manager of the LLCs or as the guarantor of those loans.
But it is Charles Cefalu, her son, who has for years been the face of the many ventures to investors, city officials, tenants, the media and contractors.
Sophie Cefalu did not return calls seeking comment this week.
On Thursday, Charles Cefalu sat down with The Post-Star to talk about the first three lawsuits.
He said he does not head any of the companies being foreclosed on, but rather acted as a real estate broker in many of the transactions.
He said he is not a member of SBC Properties or Canfield Properties and would not say who leads those entities.
The state wouldn't say, either.
The New York Department of State Division of Corporations does not require limited liability companies to list the names or addresses of members or managers. And the state Department of Taxation and Finance said that, while it keeps a "responsible party" on record, that information is not public.
According to court documents, Charles Cefalu was involved in some capacity with the sale of each property now in foreclosure. Often, companies run by or affiliated with Charles Cefalu were the actual seller of the property in question; issued the mortgages to his mother's firms; bought and sold those mortgages on the secondary market; or handled the title documents. And in at least one case, his companies filled all those roles for a single property.
Claims of impropriety
The relationships among companies affiliated with Charles and Sophie Cefalu has at least one person making allegations of impropriety.
Local developer Peter Shabat alleges that, when he sold a group of rental units to SBC Properties in 2004, one of the two mortgages issued was "a fraudulent document and a sham transaction," according to court papers.
Shabat said he extended SBC a $175,000 mortgage for the sale of 91, 93 and 95 South St. and 7 New Pruyn St. The same day, SBC obtained another loan for $125,000 from Charles Cefalu's mortgage company.
Cefalu's title company then recorded the mortgage document and listed Shabat's loan as secondary.
Only first mortgages can be traded on the secondary market, and the lender in the top spot has the first right to claim the properties in foreclosure.
The primary loan from Charles Cefalu's company was then sold to an investor in Florida, who is now foreclosing on the rentals.
Shabat said he didn't know he was listed as the second mortgage holder until he was named as a defendant in the Florida investor's lawsuit.
Cefalu, however, claims the arrangement was agreed upon at the time of the deal.
"He's wrong," he said of Shabat's claims.
Shabat said he is in the process of filing lawsuits to contest his placement as the subordinate mortgagee so that he has the right to foreclose on the properties himself. He said he also plans to foreclose on other buildings he sold to SBC Properties.
As of noon on Wednesday, the lawsuits had not been filed with the state Supreme Court in Warren County.
Asked whether it's out of the norm for a seller to be placed as the secondary mortgagee, the Mortgage Bankers Association said the standards are loose with small commercial transactions. According to George Green, an associate vice president specializing in commercial lending, the arrangement boils down to how the parties involved want the order recorded.
"Every transaction is different," Green said. "Typically, deals of over $1 million have a more formalized structure."
Charles Cefalu did not return calls Tuesday or Wednesday seeking comment on the latest foreclosure lawsuit. As of last week, he said he was hopeful that the first three would be resolved out of court.
He claimed that two foreclosure lawsuits filed by the Florida investor were in the process of being dropped, as the terms of the loans had been renegotiated.
As of Wednesday evening, the lawsuits remained active with the Supreme Court.
Calls to the Florida investor's attorney were not returned.
Charles Cefalu also said last week that the condo project was close to being refinanced.
The attorney for Community Preservation Corp., which is foreclosing on the project, did not return a call for comment.
Staff writer Maury Thompson contributed to this report.