Hundreds of rent-stabilized apartments illegally knocked off the market , AG suit claims

Attorney Letitia James, seen on May 2, filed a complaint in Manhattan Supreme Court Thursday accusing property manager David Drumheller of working with an unnamed agent to illegally move hundreds of apartments out of the rent stabilization program through price fixing with construction contractors, while accepting some $1.2 million in kickbacks. Photo Credit: Charles Eckert

Attorney General Letitia James filed a complaint against property manager David Drumheller on Thursday.

Attorney Letitia James, seen on May 2, filed a complaint in Manhattan Supreme Court Thursday accusing property manager David Drumheller of working with an unnamed agent to illegally move hundreds of apartments out of the rent stabilization program through price fixing with construction contractors, while accepting some $1.2 million in kickbacks.
Attorney Letitia James, seen on May 2, filed a complaint in Manhattan Supreme Court Thursday accusing property manager David Drumheller of working with an unnamed agent to illegally move hundreds of apartments out of the rent stabilization program through price fixing with construction contractors, while accepting some $1.2 million in kickbacks. Photo Credit: Getty Images for Pandora Media/Nicholas Hunt

Attorney General Letitia James filed a complaint in Manhattan Supreme Court Thursday accusing property manager David Drumheller of working with an unnamed agent to illegally move hundreds of apartments out of the rent stabilization program through price fixing with construction contractors, while accepting some $1.2 million in kickbacks.

“Knocking hundreds of rent-stabilized apartments off the market by illegal schemes is immoral and unacceptable," James said in a statement. "My office will work to re-regulate the units lost to this fraud, and to ensure that individuals like Drumheller are no longer in a position to abuse the rent regulation system.” 

While working at the Newcastle Realty Services property management firm in 2009, Drumheller allegedly manufactured and inflated the costs of individual apartment improvements that landlords are allowed to partially pass off to tenants through increased rents. Drumheller calculated the tabs needed to push vacant units above the threshold at which owners may charge market-rate rent, the complaint said, and used several tactics to hit that number.

They included forging job proposals that purportedly came from a network of contractors; hiring those contractors to perform work in buildings or units other than where they were said to be underway; and falsifying contractual documents.

Through 2017, this operation defrauded tenants entitled to regulated units, landlords that overpaid for renovations and owners that purchased buildings from Newcastle, which manages 2,500 apartments across the city, the complaint said.

As part of the ploy, Drumheller allegedly requested and received kickbacks from various contracting companies, which he funneled through JBD Realty Services, LLC, a firm created for buildings in his management portfolio. The payments allegedly continued after Drumheller left Newcastle Realty Services in 2016, and Drumheller met at least weekly with the agent to discuss their operation. All told, Drumheller and the agent are accused of receiving $1.2 million in cash and other perks, such as $20,000 toward a Porsche loan, payments on American Express bills and Elmwood Country Club dues.

Drumheller, through a reprensentative, declined to comment.

A Newcastle spokesman said Drumheller was fired years ago and the unnamed agent was fired as soon as the company learned about the alleged fraud from the attorney general’s office. 

The spokesman, Ronn Torossian, highlighted a section of the complaint that said the two worked to conceal the kickback scheme from Newcastle and building owners. 

“Newcastle has been cooperating with the attorney general for over a year. We stand with the NYAG (New York Attorney General) in ferreting out bad actors," Torossian said in a statement. 

Sarina Trangle