FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported) June 19, 1997
Empire State Building Associates
(Exact name of registrant as specified in its charter)
New York Partnership 0-827 13-6084254
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
60 East 42nd Street, New York, New York 10165
(Address of principal executive offices)
(Zip Code)
(212) 687-8700
(Registrant's telephone number, including area code)
N/A
(Former name, former address and formal fiscal year, if changed
since last report)<PAGE>
Item 5. Other Events
A complaint has been filed on June 19, 1997 in the Supreme Court
of the State of New York, County of New York by Wien & Malkin LLP
as Supervisor and Peter L. Malkin, individually as partner in and
on behalf of Empire State Building Associates, Empire State
Building Company, Fifth Avenue Building Associates, 200 Fifth
Avenue Associates, Navarre-500 Building Associates, 500-512
Seventh Avenue Associates, Marlboro Building Associates, 1359
Broadway Associates, 112 West 34th Street Associates, 112 West
34th Street Company, Seventh & 37th Building Associates, 501
Seventh Avenue Associates, 60 East 42nd Street Associates, Lincoln
Building Associates, 250 West 57th St. Associates, Fisk Building
Associates, 1333 Broadway Associates, 1350 Broadway Associates,
and 1400 Broadway Associates ("Plaintiffs") against Helmsley-
Spear, Inc., and Leona M. Helmsley ("Defendants").
A copy of the complaint is annexed. <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
The individual signing this report on behalf of
Registrant is Attorney-in-Fact for Registrant and each of the
Partners in Registrant, pursuant to Powers of Attorney, dated
August 6, 1996 (the "Power").
EMPIRE STATE BUILDING ASSOCIATES
(Registrant)
By: /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: June 26, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed by the undersigned as
Attorney-in-Fact for each of the Partners in Registrant, pursuant
to the Power, on behalf of Registrant and as a Partner in
Registrant on the date indicated.
By: /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: June 26, 1997
______________________
* Mr. Katzman supervises accounting functions for
Registrant.<PAGE>
EXHIBIT INDEX
Number Document Page*
25 Power of Attorney dated August 6,
1996, between Peter L. Malkin, John L.
Loehr and Stanley Katzman, the
partners in Registrant and Richard A.
Shapiro and Stanley Katzman, filed as
Exhibit 25 to Registrant's Form 10-Q
for the quarter ended September 30,
1996 and is incorporated by reference
as an exhibit hereto.
28 Complaint filed on June 19, 1997 in
the Supreme Court of the State of New
York, County of New York by Wien &
Malkin LLP as Supervisor and Peter L.
Malkin, individually as partner in and
on behalf of Empire State Building
Associates, Empire State Building
Company, Fifth Avenue Building
Associates, 200 Fifth Avenue
Associates, Navarre-500 Building
Associates, 500-512 Seventh Avenue
Associates, Marlboro Building
Associates, 1359 Broadway Associates,
112 West 34th Street Associates, 112
West 34th Street Company, Seventh &
37th Building Associates, 501 Seventh
Avenue Associates, 60 East 42nd Street
Associates, Lincoln Building
Associates, 250 West 57th St.
Associates, Fisk Building Associates,
1333 Broadway Associates, 1350
Broadway Associates, and 1400 Broadway
Associates against Helmsley-Spear,
Inc. and Leona M. Helmsley.
______________________
* Page references are based on sequential numbering system.<PAGE>
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
WIEN & MALKIN LLP as Supervisor and PETER
L. MALKIN, individually as Partner in and on behalf
of EMPIRE STATE BUILDING ASSOCIATES,
EMPIRE STATE BUILDING COMPANY, FIFTH
AVENUE BUILDING ASSOCIATES, 200 FIFTH
AVENUE ASSOCIATES, NAVARRE-500
BUILDING ASSOCIATES, 500-512 SEVENTH
AVENUE ASSOCIATES, MARLBORO
BUILDING ASSOCIATES, 1359 BROADWAY
ASSOCIATES, 112 WEST 34TH STREET
ASSOCIATES, 112 WEST 34TH STREET
COMPANY, SEVENTH AND THIRTY
SEVENTH BUILDING ASSOCIATES,
501 SEVENTH AVENUE ASSOCIATES,
60 EAST 42ND STREET ASSOCIATES, LINCOLN
BUILDING ASSOCIATES, 250 WEST 57TH
ASSOCIATES, FISK BUILDING ASSOCIATES,
1333 BROADWAY ASSOCIATES, 1350
BROADWAY ASSOCIATES, and 1400
BROADWAY ASSOCIATES,
Plaintiffs,
- against -
HELMSLEY-SPEAR, INC., and LEONA M.
HELMSLEY
Defendants.
Index No.
COMPLAINT
Plaintiffs, by their attorneys Proskauer Rose LLP, for
their complaint herein, allege as follows:<PAGE>
1. In this action for declaratory and injunctive relief
and monetary damages, plaintiffs seek redress for numerous and
repeated breaches of fiduciary duty, mismanagement and waste,
breaches of contract and conversion by defendants in connection
with the operation and management of the partnerships named in the
caption of this suit.
2. Defendant Leona M. Helmsley is the widow of the late
Harry B. Helmsley, who was a partner in the partnerships defined
herein as "Operating Entities" and "single entity" partnerships.
She is the executrix and virtually the sole beneficiary of Mr.
Helmsley's estate. Over the last several months since Mr.
Helmsley's death in January, 1997, she has been actively and
arbitrarily interfering in the management of the partnerships named
herein and has taken numerous actions without the knowledge and
authorization of the partners. She has implemented many of these
actions through her company, defendant Helmsley-Spear, Inc.
("Helmsley-Spear"), which serves as the exclusive managing and
leasing agent of the partnerships' properties.
3. The partnerships named in the caption control
thirteen major New York City real estate properties with a market
value over $1 billion. The properties were syndicated to
individual investors in an investment program initiated in the
1930's by Lawrence A. Wien, a program that was continued by Mr.
Wien, Peter Malkin, and Wien & Malkin LLP (together with its
predecessors referred to here as "Wien & Malkin" or "Supervisor")
from the late 1950's until Mr. Wien's death in 1988, and which
continues today directed by Mr. Malkin and Wien & Malkin. Mr. Wien
developed the legal and financial prototypes for real estate
syndication to individual investors. The partnerships named in the
caption control office and show room buildings containing
approximately 8 million square feet. Thousands of individual
investors have interests in these properties. Their investments
are now imperilled and subject to irreparable harm due to recent
diversions of funds, and other gross breaches of fiduciary duty by
Helmsley-Spear. Helmsley-Spear's growing level of incompetence
and disarray and its threat to the investment entities and the
properties that they control result in large part from the
arbitrary, irrational, and illegal acts of Leona M. Helmsley, who
controls Helmsley-Spear.
4. Since the death of her late husband Harry B.
Helmsley in January 1997, Leona M. Helmsley has, through the
cooperation of the substantially reduced staff at Helmsley-Spear,
insinuated herself into the management of the investment entities.
Helmsley-Spear's Executive Vice-President, Irving Schneider, whom
Leona Helmsley fired from many buildings, is also responsible to a
large degree for Helmsley-Spear's mismanagement of and incompetence
at the properties.
5. Under Leona Helmsley's and Irving Schneider's
direction, Helmsley-Spear has blatantly violated its duties as
exclusive managing and leasing agent and Leona Helmsley has
blatantly violated the express terms of the partnership agreements
governing the investment program, each of which was carefully
crafted to prevent Mr. Helmsley's successors from unilaterally
changing the method of operation of the partnerships even in the
few where they might own or control a majority of the interests in
the investment entities that operate the buildings. Leona
Helmsley's and Helmsley Spear's behavior are in violation of
partnership agreements and contrary to a continuous course of
conduct that was established at the inception of each investment
for the benefit of the partnerships and the individual investors.
6. As more fully detailed below, Leona Helmsley has
most recently ordered Helmsley-Spear to misappropriate $5,354,000
from the Empire State Building Company partnership which the
partnership needs to make a July 1, 1997 tax payment. As recently
as last August, Helmsley-Spear reaffirmed its 50-year practice and
agreed in writing "to remit all net collections of the buildings
supervised by [Wien & Malkin] for deposit into accounts that [Wien
& Malkin] maintains for the operating entities for which it acts as
supervisor." It is breaching that 50-year practice and this recent
written agreement. Helmsley-Spear's Executive Vice President,
Irving Schneider, has admitted that Helmsley-Spear is insolvent,
and therefore the $5,354,000 of misappropriated funds is at risk of
being seized by creditors of Helmsley-Spear, to the irreparable
harm of the Empire State Building Company and Empire State Building
Associates, its lessor.
7. Leona Helmsley has also been looting Helmsley-Spear
of its assets and making it, by her own admission, a worthless
company. As alleged in a complaint filed by Irving Schneider
against Leona Helmsley, she has been (a) taking a salary from
Helmsley-Spear of approximately $1 million a year for each of
herself and her late husband during the period that he was
incompetent, for little or no work; (b) charging Helmsley-Spear for
her personal airplane costs and expenses in excess of $1 million;
(c) raiding Helmsley-Spear's accounts for her personal use; and
(d) using Helmsley-Spear employees to perform personal services for
her at no charge.
8. In the few months preceding the date of this
complaint, Leona Helmsley has fired or transferred and has not
replaced much of Helmsley-Spear's central management and
engineering staff and construction management staff, and has
radically reduced its accounting department. Helmsley-Spear no
longer has a promotional leasing department. So many employees
have departed that there is and can be no continuity between
terminated staff members. No one has been hired in their place.
Indeed, Leona Helmsley has transferred the managing agent contracts
for 17 buildings as well as executives and staff members under her
control away from Helmsley-Spear to another building management
company that she owns, Helmsley-Noyes. This transfer has further
deprived Helmsley-Spear of income and staffing and has rendered it
incapable of carrying out its functions. Further, Leona Helmsley,
through Helmsley-Spear, has been taking actions and making
decisions with respect to the operation and management of the
properties, in violation of the partnership agreements, without the
knowledge and consent of the partners, the partnerships or Wien &
Malkin which is their Supervisor, and in contravention of the
partnerships' interests. Helmsley-Spear is no longer functioning
as an agent for the partnerships rather, in violation of its
fiduciary duties, industry standards, and its contractual
obligations, it is recklessly serving the interests of Leona
Helmsley.
9. The problems detailed herein cannot be corrected
without Court intervention. Leona Helmsley and Helmsley-Spear are
spinning out of control and virtually all communication from
Helmsley-Spear to Wien & Malkin, in its capacity as Supervisor, has
ceased. Helmsley-Spear is implementing Leona Helmsley's
unilateral decisions. Leona Helmsley has commenced a campaign of
harassment culminating in Helmsley-Spear's diversion of funds now
totaling $5,345,000 from the Empire State Building Company.
Helmsley-Spear is firing key staff, refusing to provide
information, and acting in dereliction of its role as exclusive
managing and leasing agent. For these reasons, we have commenced
this suit at this time and must ask the Court for immediate interim
relief.
10. Plaintiffs, therefore, seek a temporary restraining
order from this Court (a) requiring the immediate transfer into a
segregated Empire State Building Company partnership account that
cannot be drawn upon without further order from this Court or
consent of the parties the $5,354,000 that Helmsley-Spear
misappropriated from the Empire State Building Company partnership;
(b) enjoining Helmsley-Spear and Leona Helmsley from destroying any
records relevant to this litigation; and (c) enjoining Helmsley-
Spear and Leona Helmsley from taking any action or making any
decision regarding the management of the properties without the
knowledge and consent of the partnerships. Plaintiffs further seek
a preliminary injunction that will in addition require the return
of all misappropriated partnership funds into the supervisory
accounts maintained by Wien & Malkin for the partnerships, and
require immediate expedited depositions and document production in
aid of a motion (i) to terminate Helmsley-Spear as exclusive
managing and leasing agent of the properties and to designate a new
managing and leasing agent independent of any of the partners; (ii)
to prevent Leona Helmsley from voting or in any way participating
in the management of the Operating Entities as defined herein, and
(iii) for such other relief as may be necessary to protect the
partnerships.
PARTIES
11. Plaintiff Peter L. Malkin is a member of the firm of
Wien & Malkin LLP. He has been actively engaged in the supervision
of the partnerships named herein for over the past forty years and
is a general partner or controlling shareholder of a general
partner in each of the partnerships in this suit.
12. Wien & Malkin is a limited liability partnership
organized under the laws of the State of New York. Wien & Malkin
serves as the Supervisor of each of the entities named in the
caption herein. As Supervisor, the firm oversees all of the
management and operations of those entities.
13. Defendant Leona M. Helmsley is the 76-year old widow
of the late Harry B. Helmsley, who was a partner in all of the
partnerships defined herein as "Operating Entities" and "single
entity" partnerships.
14. Defendant Helmsley-Spear is a New York Corporation
that serves as the exclusive managing and leasing agent for the
buildings owned or controlled by the partnerships.
WIEN AND MALKIN INVESTMENT PROGRAM
15. Beginning in the 1930's, Lawrence A. Wien created
a real estate investment program in which he and his firm formed
partnerships through which interests were syndicated to individual
investors. Helmsley-Spear was engaged in the late 1940's as
exclusive managing and leasing agent for some of the properties.
16. Mr. Wien originally structured the investments that
he syndicated as two tier partnerships for tax purposes.
Individual investors own participation interests in partnerships
that own the title to or a long-term master lease on the properties
(the "Ownership Entity"). The Ownership Entity is essentially
passive and was structured to minimize risk and exposure. The
Ownership Entity has the right to a specified return from the
property ("base rent") as a priority before operating expenses.
The Ownership Entity net leases the property to a separate
partnership, an active entity, which actually operates and manages
the property (the "Operating Entity").
17. The Operating Entity shares all profits above a
minimum amount through additional rental payments ("overage rent")
with the Ownership Entity. The Operating Entity of each of the
properties involved in this lawsuit was owned by Messrs. Wien and
Helmsley and other private investors including Peter Malkin and
additional members of Mr. Wien's family. Peter Malkin has
succeeded to most of Mr. Wien's interests in these Operating
Entities.
18. Eight of the properties involved in this suit were
syndicated under this two entity model. When the tax laws changed,
new investments were structured as single entity partnerships.
Individual investors participated in these properties by purchasing
"participations" or shares of the partnership interest owned by an
individual partner. Three of the investments involved in this
suit are so structured.
19. In the Operating Entity and single entity
partnership agreements involved here, Helmsley-Spear was
designated to serve as the exclusive managing and leasing agent
entitling it to receive significant management and brokerage fees.
Helmsley-Spear holds a standard-form management agreement with most
of the Operating Entities and single entity partnerships. As
agent, its actions are subject to the approval of and must be
authorized by the Operating Entity or single entity partnership.
20. Wien & Malkin raised the cash investments and
drafted the governing documents and performed the legal work
involved in the creation of these investment vehicles the eight
Ownership Entities, the eight Operating Entities and the three
single entity partnerships. Wien & Malkin is designated and
serves as Supervisor for all of these investment vehicles.
21. Since Helmsley-Spear was designated as the exclusive
managing and leasing agent for the New York City buildings that are
the subject of this complaint, the participants in the Ownership
Entities and the investors in the Operating Entities and single
entity partnerships have had a direct interest in Helmsley-Spear's
honesty, competence and willingness to respond to Wien & Malkin, as
Supervisor.
22. Mr. Wien died in December 1988. Soon after, in
1989, Mr. Helmsley was indicted for violation of the federal tax
laws and was declared incompetent. From this point on, Wien &
Malkin, as Supervisor, its employees, consultants and Peter Malkin
continued to be actively involved in overseeing the day-to-day
management of the properties..
23. During the period that Leona Helmsley was also under
indictment, imprisoned and then under parole for tax fraud arising
out of her misuse of funds from entities she controlled for
personal purposes, this arrangement proved workable. Up until the
most recent period, although parts of Helmsley-Spear were
deteriorating, its remaining staff, many of whom had long-term
relationships with Peter Malkin and his firm, were reasonably
responsive to the needs of the properties supervised. On the
occasions that Leona Helmsley interfered in partnership affairs,
Wien & Malkin as Supervisor was usually able to correct her
behavior.
24. Toward the end of 1996, and with an alarming
acceleration since Mr. Helmsley's death in January, 1997,
Helmsley-Spear and its skeleton staff and executives, has
regularly been breaching its role as agent of the Operating
Entities and single entity partnerships. It has been implementing
material and reckless decisions and taking actions critical to the
operation and management of the properties without the knowledge or
authorization of Wien & Malkin or the partners. It has also failed
to respect specific direction from the partnerships or from Wien &
Malkin, as Supervisor.
25. Helmsley-Spear is not acting as a fiduciary for its
principals. At Leona Helmsley's direction, Helmsley-Spear
diverted $5,354,000 in Empire State Building Company funds in
retaliation, as explained below, for Wien & Malkin's refusal to
give Leona Helmsley signature power over the supervisory account
that Wien & Malkin, as Supervisor has maintained for the partners
in Empire State Building Company since Empire State Building
Company was created in 1961. In or about April, 1997, at Leona
Helmsley's direction, and without the knowledge or consent of the
partnership or Wien & Malkin, Helmsley-Spear unilaterally fired the
accomplished, successful and long-time director of the Empire
State Building Company Observatory. She has not been replaced.
Helmsley-Spear has decimated its own accounting and engineering
staffs. On instructions from Irving Schneider, it has refused to
pay independent accountants and contractors for many months. It
delays paying other professionals unilaterally. Helmsley-Spear has
held the funds of the partnerships to cover these payments.
26. Under the terms of a will that Leona Helmsley had
Mr. Helmsley execute in 1994 (notwithstanding the fact that he was
judged incompetent in 1989 to stand trial and continued to
deteriorate until he died this year), Leona Helmsley is the sole
executrix and virtually the sole beneficiary of Mr. Helmsley's
estate. She thus stands to inherit his rights, title and interests
in all of the properties. She intends to designate herself as a
full partner in the Operating Entities and single entity
partnerships, notwithstanding her repeated breaches of duty.
27. Because her conduct is causing irreparable harm to
these partnerships, Leona Helmsley should not be permitted to vote
any partnership interest which she may inherit from Mr. Helmsley.
Nor should she be permitted to participate in decisions relating to
the operation of buildings controlled by the Operating Entities and
single entity partnerships, including the Empire State Building.
28. The eight "Ownership Entities" and eight "Operating
Entities" referred to above are:
1) Empire State Building Associates which
leases the Empire State Building to Empire State Building Company;
2) Fifth Avenue Building Associates which
leases 200 Fifth Avenue and 1107 Broadway to 200 Fifth Avenue
Associates;
3) Navarre-500 Building Associates which leases
500 and 512 Seventh Avenue to 500-512 Seventh Associates;
4) Marlboro Building Associates which leases
the Marlboro Building to 1359 Broadway Associates;
5) 112 West 34th Street Associates which leases
112 West 34th Street to 112 West 34th Company;
6) Seventh and Thirty Seventh Building
Associates which leases 501 Seventh Avenue to 501 Seventh Avenue
Associates;
7) 60 East 42nd Street Associates which leases
the Lincoln Building to Lincoln Building Associates; and
8) 250 West 57th Street Associates which leases
the Fisk Building to Fisk Building Associates.
29. Three single entity partnerships named in the
caption directly own and operate their buildings. These three
entities are:
1) 1333 Broadway Associates;
2) 1350 Broadway Associates; and
3) 1400 Broadway Associates.
LEONA HELMSLEY'S HISTORY OF ABUSE THROUGH HELMSLEY-SPEAR
30. Helmsley-Spear has been operated by Leona Helmsley
for her own personal benefit. Through fraud and other abuses, she
has driven it to operational disarray and to financial ruin. In
the 1980s, she had Helmsley-Spear perform substantial work for some
of the multi-million dollar renovations to her Greenwich,
Connecticut estate and had it bill properties, for which it served
as managing agent. She was indicted, convicted and imprisoned for
tax fraud in connection with her misappropriation of partnership
funds for her own personal use.
31. In recent years, Leona Helmsley has allegedly looted
the assets of Helmsley-Spear by (a) taking a salary of
approximately $1 million a year for each of herself and her then
incompetent late husband from Helmsley-Spear for little or no work;
(b) charging Helmsley-Spear for her personal airplane costs and
expenses in excess of $1 million; (c) raiding Helmsley-Spear's
accounts for her personal use; and (d) using Helmsley-Spear
employees to perform personal services for her at no charge.
32. Beginning and accelerating over the last several
months since Mr. Helmsley's death, Leona Helmsley has begun
actively and arbitrarily to interfere in the management of the
Operating Entities and the single entity partnerships. Despite the
fact that she is not a partner, she has taken numerous unilateral
actions on behalf of the partnerships, without the knowledge or
consent of the partners or the Supervisor, Wien & Malkin. She has
implemented many of these actions through her company, Helmsley-
Spear, apparently with the knowledge of Irving Schneider.
33. Since the creation of each partnership, Helmsley-
Spear, by established practice and agreement, has been remitting at
least monthly and usually more frequently, all net collections of
the properties after operating costs from its agency account for
each property to Wien & Malkin as Supervisor for deposit in a
special supervisory partnership account.
34. This method of operation serves as a method of
safeguarding partnership funds from potential abuse by the managing
agent. It requires Helmsley-Spear to remit to the supervisor of
the Operating Entity or single entity partnership those funds in
excess of what the exclusive managing and leasing agent needs to
operate the property and cover ordinary operating expenses.
35. In early 1997, plaintiffs learned that Helmsley-
Spear has been misappropriating net collections from the Empire
State Building Company partnership by transferring those funds, in
an amount totaling $5,345,000 as of the date of this complaint to
a separate Helmsley-Spear account instead of to the Empire State
Building Company account maintained by Wien & Malkin as Supervisor.
Despite repeated demands by Peter Malkin and others at Wien &
Malkin, Helmsley-Spear has refused to transfer these funds to the
supervisory account.
36. This misappropriation was implemented at Leona
Helmsley's specific instruction.
37. In addition, Helmsley-Spear has overruled, for no
apparent reason, a lease agreement that was otherwise approved by
Helmsley-Spear account executives and Wien & Malkin. Helmsley-
Spear has also failed to pay or has delayed payments of bills to
third parties, and has terminated public relations consultants
engaged others without consultation.
38. In April 1997, Leona Helmsley unilaterally ordered
Helmsley-Spear to terminate Laura Fries, the long-time and highly
successful Director of the Empire State Building Observatory, who,
in 1996, was single handedly responsible for supervising and in
large part responsible for generating one sixth of the
partnership's gross income over $12,300,000 from Observatory
admissions. At about the same time, Leona Helmsley ordered her
personal counsel to file duplicate tax protests with the New York
City Tax Commission in the names of the Operating Entities and
single partnership entities, thereby jeopardizing the ability of
the properties to obtain administrative tax relief.
IRVING SCHNEIDER'S HISTORY OF ABUSE THROUGH HELMSLEY-SPEAR
39. Leona Helmsley's and Helmsley-Spear's most recent
actions have been directed primarily at the five properties located
outside of New York City's garment center: the Empire State
Building, the Lincoln Building, the Toy Center and the Fisk
Building. She has had less of an influence over Helmsley-Spear at
the garment center properties because of their domination by Irving
Schneider.
40. Irving Schneider is the 78-year old Executive Vice
President of Helmsley-Spear and the account executive for all of
the garment center buildings still managed by Helmsley-Spear.
(Several buildings formerly managed by Helmsley-Spear have been
taken away and transferred by Leona Helmsley to Helmsley-Noyes,
which she completely controls.) He now holds a small interest in
Helmsley-Spear and has been engaged for years in lawsuits he has
commenced against Leona Helmsley. He has informed Wien & Malkin
that he has exercised an option which was granted to him over 25
years ago by the late Harry B. Helmsley to acquire, together with
Alvin Schwartz--also an Executive Vice President of Helmsley-Spear-
- -, Helmsley-Spear within the next 60 days.
41. The garment center properties have fared very poorly
under Mr. Schneider's management. Vacancy rates have soared to
all-time highs in several of those properties, and are
substantially higher than in competing buildings managed by others,
tenants have been permitted to occupy spaces without paying rent or
utility charges, rents have gone without collection effort for
months at a time, Helmsley-Spear has improperly received
commissions for phony leases, bills have gone unpaid and key
resident manager positions have remained vacant. Staff positions
which require replacement have remained empty, other personnel are
hired and then quit, complaining of management improprieties and
several of the properties have gone without necessary programmed
and routine maintenance and improvements, despite specific
instructions from the Operating Entities, single entity
partnerships and Wien & Malkin, as Supervisor. In addition,
payments owing to third parties have been slow and even suspended
despite available funds in management agency accounts, thereby
injuring the reputations of the properties and discouraging
independent leasing brokers and contractors from dealing with the
properties.
42. Irving Schneider's persistent inaction with respect
to leasing, capital investments and staffing, and his management
style have demoralized, alienated and debilitated his own staff.
Three key employees have suffered heart attacks, one recently
fatal. Many have resigned from Helmsley-Spear to join competing
management companies. And with good reason. Helmsley-Spear
employee compensation is among the worst in New York City;
property-level, non-union salaries are below market rate and are
not reviewed or increased for years. No bonuses are given.
43. The resident assistant manager of 112 West 34th
Street, 1333 Broadway and 1350 Broadway, who was responsible for
both marketing and management, resigned in May, 1997 to join a
competitor; she has yet to be replaced. One garment center
building resident manager, who continued on at Helmsley-Spear until
his recent death, did so despite Wien & Malkin's instructions to
Mr. Schneider that he and his staff be discharged. Among others
things, he was physically incapacitated and could not and did not
visit several of the buildings that he managed and therefore did
not know of or failed to take action to correct kickbacks, free
occupancy, rent arrears and other improprieties. The assistant
resident managers of 500-512 Seventh Avenue and an assistant
manager of 1359 and 1400 Broadway and 501 Seventh Avenue resigned
within the last two years, and have not been replaced. Each of
them have complained of management irregularities.
44. Wien & Malkin and Peter Malkin have repeatedly
requested and then instructed Irving Schneider and Helmsley-Spear
to engage new marketing and leasing staffs for five of the garment
center buildings involved here and to engage additional marketing
and leasing personnel for the other three garment center buildings,
with no response. At present, all engineering questions, tenant
installation and capital expenditures in the Schneider-run
properties, totaling over 3 million square feet, are referred to
Schneider's personal, one-man engineering department, Peter
Terlecky. Mr. Terlecky is an 80-year old Director of Operations at
Helmsley-Spear who had until very recently been away from the
office for 5 months as a result of a triple bypass, followed by
several heart attacks and a fourth bypass and only recently
returned to work part-time. Needless to say, engineering and
construction work, including the drafting and review of job
specifications, the implementation of the bidding process, and
physical supervision of work are out of control.
45. Helmsley-Spear's management of the garment center
properties has been so poor that Leona Helmsley herself fired
Irving Schneider as account executive of one of those properties,
498 Seventh Avenue, and transferred the management of 1385
Broadway, an important garment center building that up until then
was supervised by Irving Schneider, from Helmsley-Spear to
Helmsley-Noyes, which Leona Helmsley also controls. Leona
Helmsley's termination of Helmsley-Spear as managing agent of 1385
Broadway engendered a lawsuit brought by Schneider against
Helmsley, which Schneider lost.
THE SCHNEIDER-HELMSLEY ARBITRATION
REGARDING THE DESTRUCTION OF HELMSLEY-SPEAR
46. The termination of Schneider as account executive of
the Garment Capitol Building at 498 Seventh Avenue prompted
Schneider in 1995 to commence yet additional litigation against
Leona Helmsley including both a lawsuit and an arbitration. The
arbitration has been pending for the last two years.
47. After the commencement of Schneider's litigation,
Leona Helmsley transferred management of 17 properties including
such leading office buildings as the Helmsley Building at 230 Park
Avenue, the Graybar Building at 420 Lexington Avenue and the Marine
Midland Building at 140 Broadway, to Helmsley-Noyes, Inc.
Helmsley-Noyes is not subject to the purchase option held by
Messrs. Schneider & Schwartz. Recently, she has transferred
several key executives including John B. Trainor, Jr., the account-
executive for the Empire State Building and the Toy Center, from
Helmsley-Spear to Helmsley-Noyes and has physically relocated them
from the Lincoln Building headquarters of Helmsley-Spear to the
Helmsley Building where she maintains her own office.
48. During the two years that Leona Helmsley and Irving
Schneider of Helmsley-Spear have been engaged in legal battles,
Helmsley-Spear has been left to manage some of the most important
properties in New York City, without guidance or leadership. For
a period of time, momentum and the increased involvement of Wien &
Malkin and Peter Malkin carried the buildings forward. However,
despite the repeated urgings, recommendations and demands of Wien
& Malkin on behalf of the partnerships, the pattern of
mismanagement and incompetence of Helmsley-Spear has grown steadily
worse.
49. With the death and resignations of key Helmsley-
Spear garment center executives, the closing of its branch offices,
the departure of all of its leading promotional leasing brokers to
competing real estate firms, and the elimination of its central
engineering staff, the prospects for rebuilding Helmsley-Spear as
a marketing and management company are grim. The poor reputations
of Irving Schneider, Leona Helmsley and Helmsley-Spear alone will
prevent Helmsley-Spear from acquiring the competent staff it needs
to pull itself out of ruin and back into the market.
50. For these and other reasons, Helmsley-Spear can no
longer be trusted to function properly in its role as exclusive
managing and leasing agent of the properties.
THE SUPERVISOR'S ROLE IN THE OPERATION OF THE PARTNERSHIPS
51. As Supervisor of the Operating Entities, Ownership
Entities and single entity partnerships, Wien & Malkin has, since
the inception of those entities, overseen the operation and
management of the properties by the exclusive managing and leasing
agent, including marketing, rentals, capital improvements and
maintenance of the properties. Wien & Malkin's supervision of these
activities has been the essential and continuing element in the
method of operation of all of the partnerships.
52. Wien & Malkin, as Supervisor pays mortgage charges,
ground rents and real estate taxes, supervises the insurance,
inspects the properties and renders physical inspection reports,
participates in the development and implementation of capital
improvement programs, reviews all tenant applications and work
approvals, supervises the independent public accountants, makes
distributions to the partners and to the individual participants in
the Ownership Entities, prepares and holds annual and quarterly
partnership meetings, prepares and distributes the financial
reports and tax returns of the partnerships and the tax information
returns of the individual partners and the thousands of individual
participants, and recommends to the Ownership Entities and the
single entity partnerships whether and how to adjust debt financing
on each property. Wien & Malkin also has its own engineering and
asset management personnel that regularly inspect and report upon
the physical condition of each property and review and approve
every Tenant Application and Work Approval Form for each building.
53. Wien & Malkin, as Supervisor, also oversees the
Ownership Entities, and advises the general partners of the
Ownership Entities as to all major business and investment
decisions. It serves as a critical link between the Ownership
Entities and the Operating Entities.
CHANGES IN THE METHOD OF OPERATION OF THE PARTNERSHIPS
54. Because each of the Operating Entities and single
entity partnerships was created at different times and under
different circumstances, the share of investment of Messrs. Wien,
Helmsley and Malkin in the several partnerships has varied. A
central element of each of the partnership agreements is, however,
that no matter what the proportionate amount of the Helmsley
interest, after the deaths of Messrs. Wien and Helmsley, no major
partnership decision could be made without the approval of the
Wien/Malkin interest. From inception, each of the partnership
agreements has contained a clause requiring the approval of owners
holding a specified percentage of partnership interests to change
the method of operation of the partnerships such that the consent
of the Wien/Malkin interest was always required. From time to
time, Mr. Wien sold percentages of his interest to Mr. Helmsley and
others. Each time, the Operating Entity and single entity
partnership agreement was amended so as to maintain the Wien/Malkin
control over changes in the method of operation of the partnership.
55. Each of the agreements governing the Operating
Entities requires the approval of the Wien/Malkin partnership
interest to change the existing method of operation of the
partnership. When major decisions have been made, such as
refinancing mortgages, modifying the terms of net leases or
undertaking major capital improvements to the buildings, Wien &
Malkin, as Supervisor, has always sought and received the approval
of the percentage of partner interests required under the several
partnership agreements, and where appropriate, of the individual
investors in the ownership or master lessor partnerships.
56. This veto against changes in the method of operation
was included in the partnership agreements specifically to protect
the interests of the thousands of individual investors in the
Ownership Entities who had invested in the real estate investment
program as well as the interests of the other partners in the
Operating Entities and single entity partnerships. All of the
partnerships were structured so that the person in control of the
Wien/Malkin interests would always have the power to step in and
protect the interests of the many investors in the event that
actions taken by the exclusive managing and leasing agent or any
other partner threatened the financial well-being of the
partnerships or the operation of the properties.
Misappropriation of Empire State Building Company Funds
57. As exclusive managing and leasing agent, Helmsley-
Spear is a fiduciary and has a duty to each partnership to handle
partnership funds with the greatest degree of care. It is
required, among other things, to collect rent and other revenues,
pay operating expenses, and transfer all remaining partnership
funds to the special supervisory accounts maintained since the
inception of each partnership by Wien & Malkin. Helmsley-Spear is
in a unique position to mishandle and misappropriate partnership
funds. Given (a) Helmsley-Spear's present insolvency; (b) Leona
Helmsley's practice of stripping the Helmlsey-Spear accounts of all
excess cash; (c) the refusal of Helmsley-Spear to forward to Wien
& Malkin since early 1997 all excess Empire State Building Company
partnership funds in an amount that totaled $5,354,000 as of May
29, 1997; and (d) Leona's history of fraud and abuse in dealing
with properties over which she has exercised control, the
partnership funds are clearly at risk. If Helmsley-Spear files for
or is forced into bankruptcy, the Empire State Building Company
partnership will become one of several general creditors and its
claims for the return of these funds may languish for years.
Therefore, the more than $5,354,000 in Empire State Building
partnership funds must be immediately turned over to the
supervisory account in order to protect the partnership, as well as
Empire State Building Associates and its participants, from
irreparable harm.
58. Since the inception of the partnerships and as
recently confirmed in a letter agreement between Helmsley-Spear and
Wien & Malkin dated August 21, 1996, Helmsley-Spear has been
obligated to remit each month or more frequently all net
collections of the properties to Wien & Malkin, as Supervisor, for
deposit in supervisory accounts it maintains by for the
partnerships. The supervisory accounts are used to pay real estate
taxes, rents due to the fee owner or master lessee of each
property, basic and overage due to the Ownership Entities,
distributions to all of the partners in each partnership,
supervisory fees to Wien & Malkin and certain fees to outside
accountants.
59. Other than for two brief instances in 1989 and 1991
(also allegedly instigated by Leona Helmsley while her husband was
disabled), which were quickly corrected after commencement of
arbitration by Wien & Malkin, Helmsley-Spear has consistently
complied with this practice, and has transferred, not less
frequently than each month, what it has represented to be all net
collections from the properties to Wien & Malkin for deposit in the
supervisory accounts maintained by Wien & Malkin for each
partnership.
60. Mr. Helmsley never held signatory power over any
supervisory account maintained by Wien & Malkin for Empire State
Building Company or for any other partnership. Nevertheless, on or
about November 1996, a few weeks before Mr. Helmsley's death, Leona
Helmsley demanded that she be given status as a required co-signer
on checks written on the supervisory account for Empire State
Building Company.
61. Wien & Malkin, as Supervisor, refused to giver her
such signature power for the Empire State Building Company
supervisory account because a) she was not a partner in Empire
State Building Company, b) her past wrongful practices made it
unwise to bestow such power on her because of the essential
payments made each month from this account, c) she was not a member
of Wien & Malkin, which is the entity designated in the agreement
as the Supervisor, d) the partners in Company had not approved, and
e) there was no reason to do so.
62. After Mr. Helmsley's death, Leona Helmsley ordered
Helmsley-Spear to stop sending partnership funds to that account.
63. Helmsley-Spear's unilateral and arbitrary
misappropriation of these funds without notice to or consultation
with the Empire State Building Company partners or Wien & Malkin
was in clear violation of its duties as agent to that Operating
Entity. Helmsley-Spear complied with Leona Helmsley's improper
instructions notwithstanding the fact that a) Leona Helmsley is not
a partner in Empire State Building Company; b) the Empire State
Building Company partnership agreement provides that after the
death of Mr. Helmsley, all partnership decisions shall be made only
with the approval of partners owning 80% of partnership interests;
c) the Helmsley Estate, a non-voting entity which holds only an
economic interest in the Company, owns less than 80% of partnership
interests; d) the misappropriation conflicted with established
long-standing practice, the partnership agreement of Empire State
Building Company and the written agreement between Helmsley-Spear
and Wien & Malkin; and e) Helmsley-Spear is insolvent, according to
the claims of Irving Schneider and Alvin Schwartz, the Executive
Vice Presidents of Helmsley-Spear, in their ongoing arbitration
against Leona Helmsley.
64. Helmsley-Spear's insolvency puts the $5,354,000 of
misappropriated funds at risk of being seized by Helmsley-Spear's
creditors to the irreparable harm of Empire State Building Company
and Empire State Building Associates. In addition, it confirms
Helmsley-Spear's inability to continue to manage the properties or
to handle funds independently of interference from Leona Helmsley.
Termination of The Director of Empire State Building Observatory
65. In April 1997, Leona Helmsley directed Helmsley-
Spear to terminate Laura Fries, a fourteen-year veteran in the
operation and management of the Empire State Building Observatory.
66. The decision to terminate Ms. Fries was improper and
unauthorized. Ms. Fries was the long-time Director of the Empire
State Building Observatory and had played a critical role in the
successful development of its operation. Through the relationships
she developed with tour bus companies, hotels, travel agencies, and
airlines, and through numerous creative marketing efforts such as
the annual run up the Empire State Building's stairs, the number of
visitors to the Observatory skyrocketed, greatly outdistancing
similar attractions such as the observation deck at the World Trade
Center. Due to the efforts of Ms. Fries, in 1996, the Empire State
Building Observatory generated gross income from admissions of
$12,317,000, which represented one sixth more than 17% of the
gross income from the Empire State Building.
67. Peter Malkin specifically requested that Helmsley-
Spear provide the partners in Empire State Building Company with
all information concerning an investigation of alleged theft at the
Observatory which served as the basis for the decision to terminate
Ms. Fries (even though she was in no way implicated in the alleged
theft), with all information concerning the termination of Ms.
Fries, and with all information concerning the two employees who
were implicated in the alleged theft. Helmsley-Spear still has not
provided the information Peter Malkin requested.
The Improper Charge by Deco to Empire State Building Company
68. In the 1980s, Mr. Helmsley instructed all building
managers that the Helmsley-owned company, Deco Purchasing &
Distributing Co. ("Deco"), a commercial office building supply
company, would be the sole supplier of equipment for buildings
operated by Helmsley-Spear and for partnerships supervised by Wien
& Malkin, only where Deco was the lowest bidder after competitive
bidding. (For other buildings managed by Helmsley-Spear, Deco was
to be the sole source.) When Mr. Helmsley became disabled, Leona
Helmsley ordered that Deco be the central purchasing agent for all
of the properties, allegedly to obtain volume discounts. It was
understood that Deco would not charge any commission for its
services to the properties and that Deco's bidding procedure and
pricing would be open to full scrutiny.
69. Nevertheless, on or about December, 1996, John
Trainor, the Senior Vice President of Helmsley-Spear, alerted Peter
Malkin that Leona Helmsley had unilaterally, without the knowledge
or authorization of any partner in Company, ordered Helmsley-Spear
to pay Deco an annual commission of $100,000 for obtaining unit
prices for building supplies at the Empire State Building.
70. Wien & Malkin investigated and confirmed this
information. The December 4, 1996 accounts payable disbursements
listing for the Empire State Buildingconfirmed that Helmsley-Spear
had abused its position as exclusive managing and leasing agent by
creating a payable of $8,333.33 per month to Deco. Thereafter, at
the next regular quarterly meeting of the Empire State Building
Company, Peter Malkin questioned Ray Acquadro, the President of
Helmsley-Spear, concerning the matter. Mr. Acquadro initially
denied that the charge had been imposed. He later reversed this
position. Once again, Wien & Malkin, as Supervisor, intervened on
behalf of the Operating Entity and after discovering that Deco had
already received the December 1996 payment, demanded that Helmsley-
Spear reimburse the Operating Entity, which it did.
Failure to Inform and to Respond to Inquiries
71. Since February, 1997, after a shooting incident in
the Empire State Building Observatory, Peter Malkin repeatedly
requested information from Helmsley-Spear, on behalf of Empire
State Building Company and Empire State Building Associates,
regarding the incident, what actions, if any, it has taken and
what expenditures, if any, it has made in response to and as a
result of the incident. To date, neither Peter Malkin nor the
other partners in Empire State Building Company have received any
such information. Nor has Wien & Malkin.
72. Helmsley-Spear unilaterally employed Copstat
Security, Inc. a firm that provides personal security services to
Leona Helmsley to provide security services at the Empire State
Building. By established course of conduct from the inception of
the partnerships, all contracts at the Empire State Building in
excess of a specified amount require competitive bidding and the
written authorization of the building director of operations, the
building manager, the account executive and Wien & Malkin, as
Supervisor. Copstat replaced Web Security, which had been
summarily terminated by Helmsley-Spear at the unilateral and
arbitrary instruction of Leona Helmsley. Peter Malkin has yet to
receive any documentation relating to the hiring of Copstat or the
termination of Web despite repeated requests to Helmsley-Spear. At
the annual meeting of the partners in the Empire State Building
Company on June 4, 1997, Messrs. Acquadro and Trainor reported that
they know of no written contract with Copstat and indicated that
Leona Helmsley personally engaged Copstat.
73. The Empire State Building is used as a broadcast
facility for television, radio, cellular phones, pagers and all
forms of microwave transmission and others. Gross revenue for
these activities and the ancillary rental of space required to
service these facilities totaled $5,280,000, or 7% income of the
building. On or about April 1997, Helmsley-Spear unilaterally
scheduled a precedent-setting meeting with representatives of ABC-
TV regarding the licensing of the Empire State Building antenna to
ABC-TV for its high-definition television broadcasting transmitter
("HDTV").
74. Helmsley-Spear failed to consult with any member of
the Empire State Building Company partnership or with Wien &
Malkin, which had theretofore represented Company in all TV and FM
licensing agreements before scheduling this meeting. Helmsley
Spear has since ignored repeated requests for information relating
to the contemplated agreements with ABC-TV, despite the fact that
any such agreement would require the approval of 80% of the Empire
State Building Company partnership interests. It has also ignored
proper demands for reports as to what experts in the field, if any,
are being consulted before Empire State Building Company enters
into any such agreement. At the annual meeting of the partners in
Empire State Building Company on June 4, 1997, Helmsley-Spear
disclosed to the partners and to Wien & Malkin for the first time
that CBS-TV had been permitted to hold over without a new agreement
after the expiration of its license for its television transmitter
and ancillary facilities and that Helmsley-Spear had agreed to
permit all of the New York City Networks that have been granted
HDTV frequencies to transmit temporarily from the CBS TV
transmitter apparently without charge and without any agreement for
long term transmission licensing.
75. On or about March 1997, Helmsley-Spear, at the
personal instruction of Leona Helmsley, engaged Rubenstein
Associates, Inc. to perform public relations services at the Empire
State Building, without the knowledge or authorization of the
partnership or Wien & Malkin. Leona Helmsley directed that
Rubenstein Associates be hired after Mr. Rubenstein had served
without charge as press relations coordinator in connection with
the death of and funeral and memorial services for Mr. Helmsley.
Since Rubenstein has been hired, however, no one at Helmsley-Spear
has given him direction or told him what to do. Rubenstein
Associates had previously served as public relations consultant to
the Empire State Building until its services were terminated
according to Howard Rubenstein as the result of an unfavorable
story in the New York Post about Leona Helmsley being in violation
of the community service portion of her parole after conviction of
a federal felony. Also, according to Mr. Rubenstein, Leona
Helmsley had failed to pay him several months' compensation at the
time of the prior termination of the agreements with his firm for
personal and Empire State Building services.
76. As mentioned above, early this year Leona Helmsley
instructed her personal counsel unilaterally and knowingly to file
duplicate protests with the New York City Tax Commission relating
to the properties' tax assessments. Protests had already been
filed by Wien & Malkin, as they had been filed for each property
for decades. The duplicate filings by Leona Helmsley's personal
attorneys were done surreptitiously, with no notice to any of the
partners in the partnerships and during a period when Leona
Helmsley had not even proposed that she succeed Harry B. Helmsley
and become a partner in Company or any of the other partnerships.
The estate of Harry B. Helmsley owned what had been the interest of
Harry B. Helmsley, and Leona Helmsley had no right to any
participation in partnership affairs. Even if Leona Helmsley had
been a partner, she would not have had any right unilaterally to
choose real estate tax counsel. Wien & Malkin had represented the
partnerships for decades in real estate tax matters, and her
personal counsel and she were aware from past similar incidents
that the duplicate filings precluded the partnerships from
obtaining administrative relief. While her personal counsel
recognized that the damage it was causing to the partnerships and
the fact that it had no standing, and ultimately to withdraw the
filings, administrative relief will not be available for the
payment due on July 1, 1997, and will be delayed as to the Lincoln
Building. As a result, Lincoln Building Associates and 60 East 42d
Street Associates will suffer damages because there is no
compensation for delayed tax reductions. Had the filings not been
withdrawn, administrative tax relief would have been delayed as to
the other buildings as well.
The Cleaning Agreements
77. As of October 1, 1992, Helmsley-Spear entered into
agreements with the Empire State Building Company, Lincoln Building
Associates, Fisk Building Associates, 200 Fifth Avenue Associates
and 112 West 34th Street Company to supervise cleaning services to
be provided by building personnel following the termination of a
cleaning contract with Owners Maintenance Corp., a company owned by
the Helmsleys. These agreements (the "Cleaning Agreements") were
meant to reimburse Helmsley-Spear for the cost of additional
central office personnel to oversee the special and general
cleaning work done in the buildings.
78. The Cleaning Agreements allocated payments to
Helmsley-Spear for each of the five Properties, based on square
footage, for total annual payments of $81,947. This amount was
intended to cover Helmsley-Spear's general and administrative
expenses.
79. The Cleaning Agreements provide that Helmsley-Spear
shall furnish annually to Wien & Malkin information for review on
behalf of the five partnerships as to how the general and
administrative expenses were determined and allocated by Helmsley-
Spear among the five properties. This information has not been
furnished by Helmsley-Spear since 1993, despite Wien & Malkin's
repeated requests. The operations director of the Lincoln Building
has complained that recently he and his staff at the Lincoln
Building, none of whom are Helmsley-Spear employees, have had to
assume additional responsibilities heretofore performed by
Helmsley-Spear without any reduction in the payments to Helmsley-
Spear.
Failure to Follow Standard Procedure For Collections
80. In accordance with paragraph (d) of the Management
Agreements, Helmsley-Spear, as managing agent, is required to use
due diligence in collecting all rents and other charges from
tenants occupying space in the Properties. Net collected rents
from the properties are the partnerships' primary source of income,
and amount to approximately $190 million dollars in revenues to the
partnerships each year.
81. Over the last several years, however, particularly
in the garment center buildings supervised by Irving Schneider,
Helmsley-Spear has violated the Management Agreements and the
standard procedures of the partnerships by: (a) allowing some new
and existing tenants to occupy space rent-free and electricity-free
for several months, without a lease; and (b) allowing existing
tenants to occupy space despite rents in arrears for months, and
even years, at a time.
82. Helmsley-Spear's mishandling of these matter
constitutes gross negligence. The Partnerships have had to write-
off millions of dollars in uncollected rent each year:
Rents Written Off Rent Written Off Net Rent In Arrears
1995 1996 as of April 1997
112 West 34th Street
323,692 833,165 338,532
Toy Center Properties
445,463 1,602,200 1,403,774
500-512 Seventh Avenue
464,562 591,861 35,645
7/95 -12/95
501 Seventh Avenue
239,834 171,325 349,177
1333 Broadway
351,471 143,575 550,832
1350 Broadway
512,806 297,135 339,665
1359 Broadway
N/A 147,139 23,634
1400 Broadway
785,266 403,610 202,292
Empire State Building
N/A N/A 1,755,781
Fisk Building
N/A 10,177 124,310
Lincoln Building
68,195 32,431 386,436
"N/A" means not available at this time. The figures are being
obtained from the outside accountants.
83. Irving Schneider, Executive Vice President of
Helmsley-Spear and account executive for the garment center
buildings was repeatedly advised of these improprieties. Yet,
despite repeated requests and instructions to Irving Schneider,
Helmsley-Spear's mismanagement continued to persist and problems
relating to rent collection were not corrected.
84. At 501 Seventh Avenue, tenant Original Textile's
arrears for rent, escalation rent and electricity resulted in a
write-off of $176,480 in 1995. That tenant had been in arrears for
more than two years. Yet Helmsley-Spear authorized that tenant's
rent-free use of another, larger space in the building. Another
tenant, Kim Jin Ohk Fashion, Inc., had been occupying its space
rent-free and electricity-free, without a lease, for a period of
several months as of November 1995; that space was still listed as
"vacant" on the weekly vacancy reports. Still another tenant, Ann
Rubin Imports, Inc., as of June 1996, had been occupying its space
rent-free and electricity-free with no lease, pending its
relocation to a new space. (The space it was relocating to was
remeasured by Helmsley-Spear without explanation from 1300 sq. ft.
down to 1150 sq. ft., resulting in a rent reduction for the
tenant.) As of March 1996, approximately $390,000 of unpaid rent,
electricity and other charges was owed by tenants in arrears.
85. At the Lincoln Building, tenant AR Madison
Restaurant Corp. was in arrears in the sum of $46,000, and tenant
Fleet Bank was in arrears in the sum of $186,754, as of May 16,
1997, for the months of February through April, 1997
86. At 200 Fifth Avenue, deficient record keeping by
Helmsley-Spear generally has caused rent records to be out-of-date
and unreliable, so that monthly reports sometimes indicate
delinquent amounts in error, preventing effective collection
action. Despite repeated requests, Helmsley-Spear still has not
provided the Operating Entity with sufficient skilled staff and
procedures to correct these rent records. In June 1997, the
independent accountant complained that lease summaries had not been
submitted since November 1996. Without such summaries, the billing
department does not know what base or escalation rent to bill.
87. Wien & Malkin, as Supervisor, recently instructed
the independent accountants to audit Helmsley-Spear's records at
the garment center properties supervised by Irving Schneider. The
audit of 501 Seventh Avenue revealed that during March 1997 there
was significant electrical usage for eight spaces that Helmsley-
Spear had listed as vacant. The audit of 1400 Broadway revealed
that during March 1997 thirty-two spaces for which no rent was
being paid to the single entity partnership and which were listed
as vacant by Helmsley-Spear showed significant electric usage. To
incur these electrical charges, these spaces had to have been
occupied rent-free and utilities-free despite the fact that
Helmsley-Spear listed them as vacant. Further audits revealed that
there were significant deviations between Helmsley-Spear's
Statement of Charges and its vacancy report as of April 1997 for
the buildings at 1333 Broadway, 1350 Broadway, 112 West 34th Street
and 500-512 Seventh Avenue. Over the past two years, similar
occupancy problems have been brought the Irving Schneider's
attention and he has failed to take action.
Failure To Follow Standard Eviction Procedures For Tenants In
Arrears.
88. In accordance with paragraph (d) of the Management
Agreements, Helmsley-Spear is required to use "due diligence to
institute all legal actions in proceedings for the collection of
rent and other charges, or for the dispossessing of tenants or
other occupants from the premises." More specifically, long-
standing partnership operating procedures require Helmsley-Spear to
commence legal proceedings not later than the second day of the
second month that a tenant is in arrears and sooner if a tenant has
been a repeatedly slow payer. Peter Malkin has called this
procedure to the attention of Helmsley-Spear building managers and:
account supervisors, but they have not promptly taken the required
action. With inadequate staffing and increasingly worse record
keeping, this problem has recently become more serious.
Failure To Devise Marketing Plans To Increase Occupancy Rates
89. Over the last several years, the vacancy rates at
several of the Properties have increased, very substantially and
greatly above the direct competition due in large part to Helmsley-
Spear's failure to devise or implement marketing plans to attract
tenants to the Properties. Helmsley-Spear has not taken an
aggressive modern and systematic approach to marketing. Instead,
it has relied on unimaginative, classified advertising and walk-
ins, and has failed, despite substantial prodding by Wien & Malkin,
to promote successfully the Properties with outside brokers. As to
advertising, after repeated complaints by Wien & Malkin to which
Helmsley-Spear was not responsive, Wien & Malkin had to redesign
the advertisements. Helmsley-Spear no longer have the brokers who
used to bring tenants to the building managers. The officers of
Helmsley-Spear have promised time and again to develop and submit
staffing plans and marketing programs and to combat the decline in
occupancy rates by (a) attracting tenants other than the
traditional clientele through selective canvassing; (b) offering
rent concessions and reductions; and (c) paying outside brokers
full, market rate commissions upon lease signing. Nevertheless,
implementation progress has been, at best, slow and inconsistent,
with egregious resistance from Irving Schneider despite specific
instructions to him from partners in the Operating Entities and
single entity partnerships and from Wien & Malkin at partnership
meetings.
90. As a result, vacancy rates were at an all-time high
at 1350 Broadway as of November 1996 and at 112 West 34th Street as
of November 1996. Vacancy rates are at all-time highs today at 112
West 34th Street and 1400 Broadway, two premier industry showroom
buildings under the supervision of Irving Schneider. At 501
Seventh Avenue and 1400 Broadway, vacancy rates increased from 1995
to 1996. Another property, known as 498 Seventh Avenue, was
approximately 45% vacant at the time of its sale in 1997.
91. Independent surveys done in 1996 showed that vacancy
rates for the following Properties were also exceptionally high:
1333 Broadway 53.9%; 500 Seventh Avenue 40.2%; and 1359
Broadway 20.1%. Occupancy percentages today are about the same.
Improper Receipt of full Commissions on Lease Renewals
92. Helmsley-Spear has improperly received full
commissions for lease renewals. It is supposed to receive only
one-half commissions on lease renewals. It has deliberately or
recklessly allowed tenants who are in arrears at the various
Properties to enter into new leases for the same space or different
space in the same building under a different company name, and has
accepted full commissions for the allegedly new leases, instead of
a reduced commission (1/2 the total) for a lease with an existing
tenant and its alter egos. At best, this indicates that Helmsley-
Spear has not been conducting adequate background checks on
prospective tenants and has been allowing tenants in arrears, i.e.,
undesirable tenants, to enter into alternative leases without
curing defaults. It is difficult to understand how a managing
agent could inadvertently rent a new space to an old tenant
currently in default. Although in some cases, when confronted by
Wien & Malkin, Helmsley-Spear has returned improperly-received
commissions in such deals to the partnerships it has only done so
in those instances where Wien & Malkin has investigated and caught
Helmsley-Spear accepting the inflated commissions. The inadequacy
of records provided by Helmsley-Spear to the partners or to Wien &
Malkin makes it impossible to identify all instances. However,
some examples of improperly-received commissions follow.
93. In July 1996, Helmsley-Spear submitted a Tenant
Application and thereafter executed the lease of Texamerica Ltd.,
a prospective tenant for 1359 Broadway with an indicated address at
142 West 57th Street. Texamerica Ltd. was to replace Optima
Textiles, a tenant in arrears, who was listed on the Tenant
Application as having abandoned the premises on June 30, 1996.
Wien & Malkin discovered through its inspection of the property,
however, that Texamerica did not occupy space at 142 West 57th
Street, but was listed in the 1994-1995 Manhattan directory as
occupying space in 1359 Broadway. The 1359 Broadway building
directory, in fact, listed Texamerica and Optima Textiles as
occupying the same space. Ultimately, Wien & Malkin determined
that Texamerica was an affiliate of Optima Textiles, which had not
abandoned the building but was still occupying the space without
paying rent or utility charges.
94. At 501 Seventh Avenue, in February 1997, Wien &
Malkin discovered that tenant Metropolitan, which was in arrears
for rent, was actually a derivative of Pioneer Venture, another
tenant which had previously been and continued to be also in
arrears for rent and electricity.
Failure Adequately to Compensate Its Employees and Staff the
Properties
95. The compensation of the direct employees of
Helmsley-Spear is below market rate. Therefore, Helmsley-Spear has
not attracted or retained employees of the caliber needed
effectively to manage and market the properties. Despite Wien &
Malkin's repeated oral and written demands and instructions from
partners at partnership meetings, Helmsley-Spear has failed to
submit a plan with recommendations for appropriate staffing and
competitive compensation. At several buildings there has been no
salary adjustment for Helmsley-Spear managers for three to five
years. No Helmsley-Spear managers at these buildings are
authorized to receive incentive compensation or shares in
commissions from Helmsley-Spear.
96. The mismanagement described above reflects, in part,
Helmsley-Spear's staffing deficiencies at the properties.
Helmsley-Spear has no master plan for staffing, and has failed to
augment staffing, despite repeated demands over the last several
years. As a result, many of the properties are understaffed or
staffed by inadequate people, or both.
97. Wien & Malkin has urged Helmsley-Spear to remedy
staffing deficiencies at the Properties. At a meeting in late
1996, Irving Schneider told Peter Malkin that he had not and could
not attract competent professionals at the salaries that he was
allowed to pay, and that Leona Helmsley would not allow him to
increase the salaries. Schneider also said that the internal
disputes relating to Helmsley-Spear were making it difficult to
attract qualified people. Since as early as 1993, Peter Malkin has
been urging Helmsley-Spear develop master plans for staffing and to
hire additional management and leasing staff for the nine garment
center buildings: 112 West 34th Street, 1333 Broadway, and 1350
Broadway; 1359 Broadway, 1400 Broadway and 501 Seventh Avenue; 498
Seventh Avenue, 500 Seventh Avenue and 512 Seventh Avenue. Each
group of three of such buildings, all of which have experienced
very difficult competition and extraordinarily large vacancies, has
been operated by a single manager, occasionally assisted by a
junior person (other than for 112 West 34th Street, 1333 Broadway
and 1350 Broadway, which had an assistant manager recently referred
to as a co-manager who recently left to take a position with a
competing firm). The occasional assistants to the managers of the
other buildings have all departed after relatively short tenures,
several after having alleged management and leasing improprieties.
An individual recently hired as the assistant to the manager of
1359 Broadway, 1400 Broadway and 501 Seventh Avenue is now the sole
manager of these buildings following the death a few weeks ago of
the manager. This individual reported immediately following the
June 1997 annual meetings of these partnerships that he does not
have time even to show spaces to prospective tenants and that these
buildings are at a competitive disadvantage because of unfavorable
perceptions by outside brokers, including even the few remaining
Helmsley-Spear promotional brokers who receive only a 40% share of
commissions as opposed to the 60% share available to them at
buildings not managed by Helmsley-Spear.
98. In addition, the operating staffs at many of the
properties have been inadequate. At 1400 Broadway, for example,
there are only two day porters and two painters, an insufficient
number to handle a showroom building in excess of 760,000 square
feet with hundreds of tenants. The supervisor of physical
operations for all nine buildings is Peter Terlecky, a man who is
approaching 80 years old, who underwent a triple bypass operation
about five months ago followed by additional heart attacks and a
fourth bypass, and who only recently returned to limited service.
99. The staffing situation at Helmsley-Spear has grown
steadily worse. At its height, Helmsley-Engineering had a staff of
10, including 7 professionals at the central office plus separate
engineering teams for the garment center and at a Westside branch
office that operated out of One Penn Plaza. As of February 1997,
the staff of Helmsley-Engineering was decimated; it was reduced
from 7 to 4 (including 3 professionals and 1 clerical). By May
1997, it was further reduced from 4 to 2 (including only 1 mid-
level professional and 2 clericals). One clerical person is
presently responsible for supervising the receipt and opening of
contractor bids and for issuing work approval forms whereas in the
past, engineers and highly qualified construction managers were
responsible for such work which requires professional analysis and
experience.
100. From at least 1947 until now, Helmsley-Spear has
always had an Engineering Department. Historically it had
outstanding people. All of the first-class professionals are now
gone, in large part because of Leona Helmsley. Helmsley-Spear and
the building managers cannot function properly without an
engineering department. First, all major New York City commercial
real estate management firms have central engineering departments.
Engineering departments perform major value engineering and job
supervision cost controls. Second, the buildings involved in this
litigation are all more than sixty years old, with the exception of
112 West 34th Street which is more than 40 years old. They are
subject to obsolescence and deterioration and require constant
monitoring and maintenance real estate truly depreciates over
time. The properties all require constant reinvestment. The
Empire State Building alone is nearing the completion of a $65
million rehabilitation program, and the Lincoln Building and Toy
Center are in the early stages of major improvement programs.
Overseeing this work is the job of the managing agent's engineering
department. Helmsley-Spear has none.
101. Helmsley-Spear's accounting and bookkeeping
departments were radically reduced in recent months when
approximately 15 persons were terminated. Other key personnel,
including the long-time Helmsley-Spear comptroller, were
transferred from Helmsley-Spear to Helmsley-Noyes, the company that
Leona Helmsley completely controls and that now manages properties
she controls.
102. The real estate leasing operation at Helmsley-Spear
has been ruined. When Mr. Helmsley was active in the business
through the early 1980's, each building had its own leasing office,
which was fed by Helmsley-Spear's large promotional leasing network
staffed by dozens of the top leasing brokers in the City. Leasing
brokers would feed deals to resident managers. That network has
been destroyed as Leona Helmsley's influence has grown. Branch
leasing offices have been closed. Leasing is presently being done
by resident managers whose offices are not adequately staffed.
FAILURE TO IMPROVE ADEQUATELY AND MAINTAIN THE
PHYSICAL CONDITION AND APPEARANCE OF THE PROPERTIES.
103. Wien & Malkin conducts physical inspections of the
properties, quarterly or more frequently, and submits reports of
such inspections to Helmsley-Spear that reveal that the properties
(with the exception of the Empire State Building, which with the
supervision of Wien & Malkin, is nearing completion of a $65
million capital improvements program) are increasingly in need of
overall upgrade and improvement programs. The lack of professional
marketing and improvement programs in many of the properties makes
it difficult to improve occupancy and rental rates. Peter Malkin
has repeatedly but unsuccessfully requested at formal meetings and
in correspondence that Helmsley-Spear submit programs and budgets
for improvements at several buildings operated by the partnerships.
To make progress at 200 Fifth Avenue, 1107 Broadway and the Lincoln
Buildings, Peter Malkin has provided at cost the professional
engineering team of W&M Properties, as approved by Leona Helmsley
in 1996, but she thereafter instructed Helmsley-Spear not to pay
for such services rendered.
FAILURE TO FOLLOW STANDARD PROCEDURES
FOR THE HIRING OF OUTSIDE CONTRACTORS
104. Although standard operating procedure requires
Helmsley-Spear to hire the lowest qualified bidder for construction
work, recent investigation discloses that it does not follow that
practice consistently. Rather, it has been found to hire the same
contractors at the same properties time and again, calling into
question the integrity of its bidding process. At 501 Seventh
Avenue, which is run by Irving Schneider, Excel Drywall
Contracting, received 100% of the jobs it bid for, even though it
did not always submit the lowest bid and often billed and was paid
for change orders and "extras." Wien & Malkin investigated and
discovered that a relative of the building superintendent employed
and supervised by Helmsley-Spear but paid by 501 Seventh Avenue
Associates, was employed by Excel. Wien & Malkin insisted and
Irving Schneider on behalf of Helmsley-Spear agreed that no more
work be awarded to Excel at that property. Nevertheless,
thereafter, on or about November 1995, Helmsley-Spear unilaterally,
without the required consent of the partnerships or of Wien &
Malkin, awarded a contract to Excel to do work at 501 Seventh
Avenue. Helmsley-Spear sent a work approval form to Wien & Malkin
only after Excel had already commenced work and after Wien & Malkin
requested confirmation that Helmsley-Spear was honoring their
agreement. Although Wien & Malkin rejected the work approval form
and notified Helmsley-Spear that Excel should not be paid by the
partnership, four employees of Helmsley-Spear approved and
Helmsley-Spear paid that Excel bill on January 10, 1996 with
partnership funds.
RESULTS OF INADEQUACY OF
HELMSLEY-SPEAR'S CENTRAL ENGINEERING
105. It is a managing agent's role to provide central
engineering services. From the inception of the partnerships,
Helmsley-Spear's services as exclusive managing and leasing agent
have included engineering services as part of the necessary
services for the Helmsley-Spear fees and continued engagement.
Based on the elimination of Helmsley-Spear's engineering staff,
however, as well as the performance deficiencies noted below, it is
apparent that such engineering services are no longer being
performed.
106. With respect to the major facade restoration at 1107
Broadway, Helmsley-Spear oversaw the preparation of job
specifications and contract bidding resulting in a base bid of
approximately $1.4 million. Subsequent audit review arranged by
Wien & Malkin through W&M Properties, Inc. revealed that Helmsley-
Spear's specifications included some unnecessary work while
omitting certain necessary work. Such omissions would have
required change orders in the field at premium costs. With such
change orders, total costs would have exceeded $2 million. When
new specifications were prepared by an independent engineer under
the supervision of W&M Properties, Inc. and the job was re-bid, the
total cost was only $1.2 million.
107. At 1107 Broadway, there was evidence that water had
penetrated the roof. Helmsley-Spear's patchwork solution was to
place a new roof on top of the old roof, rather than to investigate
the flow of water. Upon investigation by Wien & Malkin as
Supervisor, it turned out that, undiscovered by Helmsley-Spear, the
water from the roof was seeping through into the steel structure of
the building and eroding it. What was represented by Helmsley-
Spear to be a $300,000 roof replacement job was actually a $1
million job to replace the roof and the building's roof supporting
steel structure. Had the recommendation of Helmsley-Spear been
followed, the roof condition would not have been corrected and the
work would have had to be redone completely. This experience
indicates Helmsley-Spear's poor management capability.
108. At 1107 Broadway and 200 Fifth Avenue, Wien &
Malkin's representative has discovered that sidewalk vault
restoration work is required at a cost in excess of $1 million.
Helmsley-Spear has not properly maintained these sidewalk vaults.
109. In 1995, 200 Fifth Avenue Associates, at a meeting
directed Helmsley-Spear to install sprinklers in the basement of
200 Fifth Avenue. This work still remains undone.
110. Helmsley-Spear awarded a job to remove asbestos from
the basement of 200 Fifth Avenue for less than $100,000. Helmsley-
Spear subsequently approved a change order that would increase the
total cost to $300,000, including excess work claimed by the
contractor. Through Wien & Malkin's efforts, it was discovered
that the square footage of the work area claimed by the change
order was significantly larger than the actual square footage of
the basement, and that, therefore, it was impossible for the
contractor to have done the work claimed in the change order. As
a result, Helmsley-Spear is no longer recommending payment under
the change order, but the matter has yet to be resolved with the
contractor.
111. The 60 East Club vacated the 26th and 27th floors of
the Lincoln building on December 1995. The space remained
untouched for nearly nine months. Wien & Malkin instructed that
the space be demolished and prepared for show. Little progress was
made for several months until W&M Properties assisted Helmsley-
Spear by supervising the preparation of preparing plans and
specifications and recommended contractors to bid for the work to
be done. Helmsley-Spear adopted the plans, specifications and
contractor recommendations but the lost time resulted in lost rent
for the space.
112. Induced by a program offered by Consolidated Edison
Company to refund a major portion of capital expenditures for
energy conservation, which Helmsley-Spear had advised would result
in a rebate of approximately $400,000, 112 West 34th Street Company
authorized Helmsley-Spear to undertake the replacement of that
building's central air conditioning chiller plant at a cost of
approximately $1 million. Helmsley-Spear undertook the work before
submitting the required documentation and as a result, Consolidated
Edison Company has denied responsibility for the refund.
FAILURE TO PAY INVOICES
113. Although standard operating procedure requires
Helmsley-Spear in its role as agent to pay invoices and pay them
promptly, Helmsley-Spear has not been following this practice, and
as of late, has been violating its fiduciary duty by being
selective with respect to the invoices it chooses to pay.
Helmsley-Spear is, at best, late in making payments to third-party
vendors, brokers and other service providers. As a typical
example, just this week, Peter Malkin was informed that Helmsley-
Spear has been withholding for at least seven months the payment of
regular monthly accounting fees to the independent certified public
accountants who review the books and records of Helmsley-Spear, as
managing agent of 1350 Broadway. Irving Schneider is the
supervising account executive of 1350 Broadway. The in terrorem
impact upon the independent accountants who are engaged by the
partnership to supervise the books and records of Helmsley-Spear is
obvious.
114. Despite the fact that Leona Helmsley and Helmsley-
Spear approved the engagement of W&M Properties (at no cost to
Helmsley-Spear) to supervise major construction projects at the
Lincoln Building, the Toy Center and the Fisk Building, and despite
the demonstrated beneficial results of W&M Properties' involvement
in reducing costs and moving long stalled projects forward,
Helmsley-Spear has failed for many months to pay any of W&M's
invoices for services at the Toy Center and has been very slow in
paying at the Lincoln Building.
115. Helmsley-Spear had also failed to pay the more than
$20,000 of invoices issued by Rubenstein Associates for public
relations services to the Toy Center during February, March and
April 1997. As a result, Rubenstein suspended services during a
critical time period for effective public relations management
while the Toy Center was in a major public dispute and litigation
with the Toy Manufacturers of America. The payments were only made
after repeated written and oral requests from Wien & Malkin and
repeated resubmission of statements by Rubenstein Associates.
Payments to Rubenstein & Associates relating to Empire State
Building were also similarly delayed following the February 1997
shooting incident and its reengagement by Helmsley-Spear, without
consultation with Wien & Malkin or the partners in Empire State
Building Company.
FIRST CAUSE OF ACTION
(Declaring that Defendant Helmsley Does Not Have The Right To
Become a Partner With Voting Power or Management Rights and
Enjoining Her From Interfering in Partnership Affairs)
116. Plaintiffs repeat and reallege the allegations set
forth in paragraphs 1 through 115 as if fully set forth herein.
117. As beneficial owner of Helmsley-Spear, as the
attorney-in-fact to Mr. Helmsley for many years, and as the
purported assignee of the late Mr. Helmsley's right, title and
interest in the Operating Entities and single entity partnerships,
Leona Helmsley owes a fiduciary duty to plaintiffs and to the
Operating Entities and single entity partnerships to: (a) act in
the best interest of the partnerships with the utmost good faith,
fairness, loyalty and due care; (b) avoid any circumstance where
her own interests might conflict with the interests of the
partnerships; (c) refrain from taking any action or assisting,
aiding or abetting any other person or entity from taking any
action to change the method of operation of the partnerships
without the requisite partnership vote under the various
partnership agreements; and (d) direct Helmsley-Spear to perform
its duties and managing agent in a competent manner and to fully
and faithfully carry out its fiduciary, legal and contractual
obligations to the Operating Entities and single entity
partnerships.
118. Leona Helmsley has breached her fiduciary duties to
plaintiffs by committing the wrongful acts and omissions alleged
herein and having directed Helmsley-Spear, Inc. to commit the
wrongful acts and omissions alleged herein, to the detriment of
plaintiffs.
119. Plaintiffs therefore seek a declaratory judgment
pursuant to CPLR 3001, that Leona Helmsley may not vote or
otherwise exercise any management rights in the Operating entities
or single entity partnerships.
SECOND CAUSE OF ACTION
(Enjoining Helmsley-Spear from Implementing Changes in the
Operations of the Buildings without the Requisite Approval of the
Partners)
120. Plaintiffs repeat and reallege the allegations set
forth in paragraphs 1 through 115 as if fully set forth herein.
121. Helmsley-Spear has assisted Leona Helmsley in
implementing changes in the operations of the partnerships without
the approval of the percentage of partnership interests required
under the agreements governing the Operating Entities and single
entity partnerships including the failure to forward partnership
funds to Empire State Building Company accounts, the authorization
of the filing of applications for the reduction of assessments with
the New York City Tax Commission, the termination of the manager of
the Empire State Building Observatory, and the failure to provide
the supervisor Wien & Malkin with timely information regarding the
properties.
122. Plaintiffs thereby seek an injunction prohibiting
Helmsley-Spear, its employees, agents, and assigns from
implementing any changes in the operations of the Properties
without the percentage required under the Partnership agreements.
THIRD CAUSE OF ACTION
(Termination of Management Agent Contracts)
123. Plaintiffs repeat and reallege paragraphs 1 through
115 as if fully set forth herein.
124. As managing agent of the properties, Helmsley-Spear
and its principals have a duty to provide good and prudent
management to the properties, and to refrain from taking any action
or assisting, aiding or abetting any other person or entity from
taking any action to change the method of operation of the
properties without the requisite partnership vote required under
the various partnership agreements.
125. Helmsley-Spear has assisted defendant Helmsley in
the wrongful acts and breaches of fiduciary duty set forth above.
126. Helmsley-Spear has mismanaged the properties and has
wasted Operating Entity and single partnership entity assets by
committing the wrongful acts and omissions alleged herein, to the
detriment of plaintiffs.
127. Plaintiffs therefore seek a declaratory judgment
pursuant to CPLR 3001 that Helmsley-Spear be terminated as managing
and leasing agent of the properties.
128. Plaintiffs also seek preliminary and permanent
injunctive relief pursuant to CPLR Article 63 ordering Helmsley-
Spear to immediately remit to Wien & Malkin $5,354,000 for deposit
in the Empire State Building Company supervisory account together
with any other funds it has withheld from Empire State Building
Company or any of the other partnerships in excess of those funds
needed for ordinary building operations.
FOURTH CAUSE OF ACTION
(Conversion and Breach of Contract Against Defendant Helmsley-
Spear)
129. Plaintiff Wien & Malkin repeats and re-alleges the
allegations set forth in paragraphs 1 through 115 as if fully set
forth herein.
130. Helmsley-Spear has violated the partnership
agreements, established course of conduct, and written agreement
with Wien & Malkin dated August 21, 1996 by refusing to remit all
excess operating funds derived from the properties to Wien &
Malkin.
131. Plaintiffs also seek preliminary and permanent
injunctive relief pursuant to CPLR 6301 ordering Helmsley-Spear to
immediately remit to Wien & Malkin $5,354,000 for deposit in the
Empire State Building Company supervisory account together with any
other funds it has withheld from any of the other Operating
Entities or single entity partnerships. <PAGE>
WHEREFORE, plaintiffs demand judgment:
A. Declaring that Leona Helmsley has no right to vote
or to participate in any way in the management of the Partnerships.
B. Declaring that Helmsley-Spear is terminated as
exclusive managing and leasing agent of the properties, and
requiring Helmsley-Spear to turn over all partnership books and
records to plaintiffs.
C. Ordering Leona Helmsley and Helmsley-Spear to
immediately remit to plaintiff Wien & Malkin all Partnership funds
in excess of necessary operating balances, including the $5,354,000
for deposit in the supervisory account of Empire State Building
Company together with any other funds it has withheld from any of
the Partnerships on whose behalf it manages the Properties.
D. Preliminary and permanently enjoining Leona Helmsley
and Helmsley-Spear (including its principals, officers, agents or
assigns) from taking any action or assisting, aiding or abetting
any person or entity from taking any action to change the method of
operation of the partnerships without the requisite partnership
vote required under the various partnership agreements.
E. Awarding such other and further relief as this Court
deems just and proper.
PROSKAUER ROSE LLP
1585 Broadway
New York, New York 10036
(212) 969-3000
Attorneys for Plaintiffs
June 19, 1997
