An attorney who handles funds for some of New York’s biggest multifamily landlords seems to have disappeared, leaving his clients worried that millions of dollars placed in escrow accounts have as well, sources with knowledge of the scandal told The Real Deal.
Mitchell Kossoff, managing partner of Kossoff PLLC, has been unreachable for several days by his partners at downtown Manhattan law firm and the landlords for whom he holds millions of dollars in escrow accounts, according to clients who have attempted to contact the firm.
Kossoff could not be reached for comment, and the partners at his firm did not respond to multiple requests for comment.
One client has already sued the firm, accusing it of “potentially criminal acts” that constitute a “grievous breach” of its duties.
Westchester-based investor Rob Yaffa filed the suit Wednesday through a limited liability company that struck a deal last May to sell a 10-unit apartment building at 537 Edgecombe Avenue in Upper Manhattan for $4.5 million. The buyer wired $590,000 to an escrow account controlled by the law firm, which was to be released after the March 26 closing when Yaffa lined up another building in a 1031 exchange, according to the lawsuit.
But Yaffa said Kossoff never wired the money for the 1031 deal and went off the radar.
The investor “does not know the disposition of the sale proceeds and despite questioning has been unable to obtain a direct response,” his attorneys wrote in the complaint.
Yaffa declined to comment.
The scandal has rocked some of the real estate clients who worked with Kossoff’s firm and are now asking about the status of their money, according to landlords who spoke to TRD on condition of anonymity.
Kossoff is a prominent landlord-tenant attorney, and some of the escrow funds he oversees include money landlords would set aside for tenant buyouts. Cash held in escrow makes it easier to negotiate buyouts in rent-stabilized apartments.
Attorneys also hold funds in escrow for buyers and sellers of property, as well as advances and retainer fees clients pay their lawyers. Escrow fraud by attorneys, particularly in residential deals, is such a problem that a special fund was established to compensate victims.
“Every couple of years you have one of these cases where an attorney runs off with his client’s money,” said one landlord familiar with Kossoff’s case, speaking on the condition of anonymity.
As recently as Tuesday, the list of clients that Kossoff’s firm claims on its website to have represented included Icon Realty Management, Stellar Management and Stonehenge Partners. That page was taken down shortly after TRD made inquiries.
It could not be determined if any of these companies are missing funds. None responded to requests for comment.