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Real Estate Fraud and the New York Yankees
Details are now emerging from a Congressional subcommittee hearing that seem to suggest that the City of New York, along with the New York Yankees, may have committed real estate fraud in their attempt to pay for the construction of a new $1.3 Billion stadium in the South Bronx.
According to the Interim Report into Public Financial Assistance for the New Yankee Stadium, which was prepared for the House Oversight and Government Reform Committee’s Subcommittee on Domestic Policy by New York Assemblyman Richard L. Brodsky, City of New York officials intentionally misrepresented to the Internal Revenue Service (IRS) the value of the stadium’s property, which in turn helped the City secure special tax deals from the federal government.
Apparently, the City of New York used comparable land values in the borough of Manhattan rather than the Bronx to place a value for the new property upon which the stadium is being built. (The new ballpark is being constructed across the street from the current one, on the present site of Macombs Dam Park.)
Today’s House Oversight and Government Reform subcommittee hearing in Washington, D.C., was called by Congressman Dennis Kucinich (Democrat, Ohio), Chairman of the Subcommittee on Domestic Policy, to examine whether the use of the federal tax code to subsidize the construction of professional sports stadiums and arenas furthers the public interest. It was the third hearing held by Kucinich’s group on this subject and the first to examine alleged improprieties in the financing process of the New York Yankees new stadium.
“In the case of the new Yankee Stadium,” Congressman Kucinich said, “not only have we found waste and abuse of public dollars subsidizing a project that is for the exclusive benefit of a private entity, the Yankees, but also we have discovered serious questions about the accuracy of certain representations made by the City of New York to the federal government.”
Furthermore, Kucinich says that the Subcommittee on Domestic Policy has found substantial evidence of improprieties and possible fraud by the financial architects of the new Yankee Stadium.
As Flipping Frenzy readers know, inflated appraisals are often involved in the advancement of real estate and mortgage fraud. More often than not, a key player in an illegal flipping operation is the appraiser, who inflates the value of the house on paper to enable the buyer to qualify for a higher loan. Sometimes, a real appraiser is pulled into the scheme. In other cases, the appraisal is simply a phony document.
At issue for the City of New York, the New York Yankees, the IRS, and now the United States Congress, is the valuation of the land used for the site of the new stadium. Similar to residential real estate, municipal real estate developments require appraisals. In the case of Yankee Stadium, New York Assemblyman Brodsky and others–including members of Congress–believe that the value of the stadium land was grossly inflated and misrepresented to the IRS in order to justify more than $900 Million in tax-exempt bonds that were issued to finance construction of the stadium.
If in fact the allegations are true, the City of New York and the New York Yankees may just be key figures in the largest real estate fraud scam ever to be uncovered in the U.S.
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