Over the past several years many people have sought me out requesting help or advice on what they believe are questionable financial activities (campaign finance or otherwise) often involving one of our local elected officials. Like any type of review or investigation it usually manifests itself out of what I refer to as surface questions; activity to the naked eye that begs further inquiry. Ultimately, legal, accounting and tax related expertise may be needed to draw a conclusion.

There is nothing wrong with asking questions and the days of hurting someone’s feelings or impugning their integrity are long gone in my mind. When you are an elected official you need to understand that it is incumbent upon you to ask questions and demand answers no matter how uncomfortable it may be; or how embarrassing to yourself if eventually proven wrong.

Many people are familiar with this story, but we also believe that because it is discussed within a close circle of the political insiders, community leaders and activists that we interact with on a regular basis, everyone is in the know. To the contrary most of the general public is unaware of not only the underlying details of this story but maybe even the entire story itself.

On March 13, 2013 a Mr. Zishe Babad purchased a property known as 126-128 Union Road in Spring Valley from Lazerbeam Acreage LLC for $290,000.00. Lazerbeam had purchased the property in 2010 from a Joseph Gross of Spring Valley for $209,000.00.

Mr. Babad had a busy day that March 13, also purchasing the neighboring property of 130B Union Road, also in Spring Valley, from a Mr. Lesser Gross for $275,000.00. Eight months earlier Lesser Gross purchased the property for $175,000.00.

Babad obtained mortgages of $217,500.00 and $206,250.00, respectively, to purchase the properties, a favorable LTV (Loan to Value) of 75% based on the purchase price of the properties; not necessarily the appraised values.

Fast forward to May 14, 2015, 26 months later. Mr. Babad separately deeds 126-128 Union Road and 130B Union Road to Lesser Gross as Trustee of the Yitzchok & Shifra Trust, (03/08/13), 20% interest; and Yitzchok Ullman as Trustee of Lazerbeam Trust, (03/08/13), 80% interest for $0.00.

Yes – the same Lesser Gross that sold 130B Union Road to Babad 26 months earlier for $275,000.00.

Yes – Yitzchok Ullman, the same name as the current Ramapo Town Supervisor, former town councilman and 2017 candidate for another town council term.

Yes – no consideration, but in actuality the transaction has all the signs of a table-flip, as the two trusts sell the properties the same day to Bluefield Extension LLC for 2.2 million.

Yes – 2.2 million, $900,000.00 for 130B and 1.3 million for 126- 128. Certainly a small premium to pay for any developer gambling on a huge future payoff from multi-family dwellings.

A table flip is a threesome – in mortgage parlance that is. You have the seller/transferor, in this case Babad, the buyer/transferee, the trust’s, and another buyer, Bluefield, making the trust’s simultaneously a buyer/transferee and seller. The recent sale of the Novartis property in Suffern appears to be a similar transaction, minus the zero consideration, but that is a story for another day.

In general, one lending source and possibly cash is normally involved in a table flip, with the funding of the second sale usually covering the entire amount due on the first sale.

In this particular transaction we at least have some semblance of the source of funds, which is always the most important question with LLC’s. The Bluefield sale involved a mortgage from a TBG Funding in Brooklyn, New York for 2.4 million.

Yes – 2.4 million, $200,000.00 more than the sale price of the two properties sold to Bluefield Extension LLC.

In this day and age even the riskiest hard money lender will generally shy away from financing 100% of the appraised value, if the appraised value is in fact 2.2 million. When you look at the mortgage, however, you discover why. The mortgage is a blanket mortgage and the appraised value of the properties involved appears on the surface to provide sufficient protection to the lender.

A blanket mortgage is a loan secured by more than one property and is often associated with a mortgage on a large tract of land that is then sold off in parcels. For any blanket mortgage the mortgage is paid down if one of the properties is sold. The lender should ensure a sufficient LTV on the remaining property or properties, which may require cash or additional collateral from the borrower to meet their requirements. The borrower can also realize a profit on the individual property sold.

The reasons for a blanket can range from simply eliminating the need for multiple loans to saving on closing costs – to taking additional collateral to improve the LTV for a better rate. It is the additional collateral which strengthens the loan, especially if the value of one or more of the proposed properties is suspect.

For the TBG loan three properties are involved, the two on Union Road and 643 Bedford Avenue in Brooklyn owned by 643 Bedford LLC. Six forty-three Bedford Avenue is a multi-family home, the value of which seems to be sufficient when combined with the other properties to protect the lender, TBG.

The two properties on Union Road are part of what is known as Bluefield Extension, located at the intersection of Bluefield Drive and Union Road in Ramapo. The Town of Ramapo, of course, changed the zoning in January of 2014 to multi-family and the developer is seeking to build 15 units valued at a projected $600,000.00 each, and maybe more. Good to see more affordable housing for the county.

Several adjacent properties are also part of the extension plan aside from the two that are the subject of this article. One has a house that was severely damaged in an August 2015 fire and is currently accessible to the public with a front overhang that is on the verge of collapse. Where is the Town of Ramapo?

While you can never be 100 percent certain unless you see the mortgage file and closing documents for the TBG mortgage, the two Union Road properties deeded by Mr. Babad were in all likelihood paid off from the proceeds of the TBG loan, as satisfactions of mortgage for each from the previous lender were recorded about six weeks later, the general time frame for the process.

Coincidentally, a Yitzchok and Shifra Ullman purchased a single family home in Monsey on May 15, 2015 for $500,000.00, with no mortgage; one day after the trust’s sold the property to Bluefield. Five months later that home was mortgaged for $400,000.00.

As for Babad, it appears he may have given up about $150,000.00 of his own money. Since the combined purchase of the Union Road properties were $565,000.00, and the combined mortgages were $423,750.00, with estimated closing costs it means he plunked down about 150 grand of his own money – his own money.

On December 22, 2016, TBG Funding gave a partial release of their mortgage, keeping 643 Bedford Avenue and releasing the two Union Road properties. On that same day Bluefield Extension LLC and Sunshine Gardens Realty LLC obtained a mortgage from the Louis Galpern Retirement Plan and Trust Defined Benefit; Natalie Galpern and Nicole Galpern as Trustees of the Vega Irrevocable Trust; and Park National Capital Funding LLC for $850,000.00.

The mortgage is another blanket, secured by three properties, the two Union Road properties and another Union Road property, 122 Union Road, also part of the Bluefield Extension plan.

On January 4, 2017, TBG Funding assigned their mortgage to Customers Bank in Phoenixville, Pennsylvania for $1,000,000.00, with 643 Bedford Avenue as the sole property securing the loan; the mortgage having been reduced by 1.4 million.

There is a multitude of legitimate questions that can be asked about these transactions that only the files, tax returns and the participants can answer. Exactly who will ask them with any authority in Rockland County is a better question. Those questions, though, pale in comparison to a much bigger picture.

We all know that Limited Liability Companies have become nothing more than a vehicle to obfuscate not only the true owners but the source of funds. Don’t bother checking the LLC’s in this article, they are all interlocking relationships.

The United States is the most heavily regulated country in the world but there remains a tremendous gap in the oversight of LLC’s. There is no check and balance measures to determine the legitimacy of funding sources. Title companies, attorneys and referees in foreclosure sales have no legal responsibility to report anything suspicious, nor can they be held liable for being willfully blind. County clerks and tax collectors have no requirements or systems in place to discover patterns of property transfers or third party/cash property tax payments.

Do not be misled by a mortgage as mortgages still need to have down-payments and have to be repaid. Mortgages are still susceptible to all types of fraud and lax controls especially involving funding companies, appraisers and mortgage brokers, all of which are not as regulated as banks.

There is simply no comprehensive cross-checking system in place to connect LLC’s, mortgage/deed recording information, political contributions, property tax payments, Medicaid, unemployment and welfare payments to generate red flags for investigation. Can one be designed – sure – and it may not even be too expensive for a local government. It would be a great project for the District Attorney to undertake, and maybe someday we will elect one.

The second question? Do you like the possibility of elected officials being involved directly in business deals with constituents and developers that come before the planning and zoning boards of their jurisdiction? Or do you like it at all?