Lower East Side Nursing Home Purchase May Have Defrauded City, State Sen. Says

LOWER EAST SIDE, NY — A real estate company may have misled the city so it could turn a non-profit healthcare facility into luxury condominiums, a state official said in a letter to New York Attorney General Eric Schneiderman.

In 2015, Allure Group purchased the nursing home for $28 million, then paid the city $16.15 million to remove a deed restriction that was in place requiring the site to be operated as a non-profit residential healthcare facility, State Senator Daniel Squadron said in the letter to Schneiderman and Corporation Counsel Zachary Carter.

In a move that Squadron says "stunned the community," Allure then shut down the nursing home and proceeded to flip the property for a huge profit, selling it for $116 million to developers to turn it into luxury housing.

If Allure made false claims to induce the city to remove the deed restrictions, it may have defrauded the city under the State and City False Claims Acts, Squadron said.

The DiBlasio administration claims that Allure Group did in fact conceal its plan to halt nursing home operations on the property. In an investigation this past summer, though, the city's Department of Investigation found that city officials knew of Allure's plans but gave it the green light anyway.

"While representations had been made to the City suggesting that Rivington would continue to be used as a nursing home, several City employees knew the property owner considered selling the property for conversion to luxury housing," the report said.

"In addition," the report reads, "senior City officials knew or should have known that the lifting of the deed restriction would allow the buyers of the property to legally use the building for any purpose, including luxury housing.”

The report says that city officials "were aware of the deed restriction removal months in advance, yet raised no objection or took any step to ensure that the property would continue to serve the community or a public purpose."

The DOI does concede, though, that "there appear to have been attempts to conceal some details of the sale."

As Squadron writes in his letter, in addition to investigating government responsibility and the procedural problems that allowed Rivington House to be lost, "it is also vital that we hold those accountable" —namely, Allure Group — "who may have violated the public’s trust."

Image via Google Maps