Capital New York

On Oct. 18, The New York Times weighed in on the escalating battle over a proposed homeless shelter in Carroll Gardens, highlighting fears that the facility for 170 men would “set the now-thriving neighborhood back to its ragged and treacherous days.”

Local elected officials, however, are raising questions about narrower—and for the Bloomberg administration, potentially more embarrassing—problems with the project, involving apparent conflicts of interest.

While few specifics of the proposed no-bid contract between the city and a nonprofit shelter operator have been disclosed, public records indicate that the bidder has an unusually involved relationship with the building’s landlord, who stands to profit from the deal.

That landlord, as identified by the Times story, is a man named Alan Lapes.

To advocates for the homeless, Lapes’ involvement comes as little surprise. For more than a decade, he’s been one of the most active—and controversial—players in the industry surrounding the provision of beds to society’s most needy. While the service is vital, people who have dealt with Lapes say his record is troubling, littered with complaints about poor supervision and lousy living conditions.

Despite multiple scandals—a 2007 Daily News article about one of his facilities dubbed it the “Hell Hotel”—Lapes has steadily, stealthily managed to build a shelter empire. During the last year, as demand for beds increased due to cutbacks in other city programs, the landlord has opened multiple facilities while working in concert with a newly formed, politically connected nonprofit, Housing Solutions USA, headed by Robert Hess, the Bloomberg administration’s former head of the Department of Homeless Services.

Public records suggest Hess and Lapes have formed a tight partnership. When Housing Solutions USA filed incorporation papers last year, it listed its address as 317 West 95th Street, a property controlled by Lapes. (This August, the building was converted into a homeless shelter, over neighborhood objections.)

Housing Solutions has declined to release IRS documents, as is required by federal law, that would disclose its outside board members, claming the organization has yet to file a tax return. But two of three board members listed on its website have business connections to Lapes.

Hess declined to be interviewed for this article. Lapes did not immediately respond to an email request for comment, nor to a message I left with a manager when I visited one of his shelters.

In 2002, though, the property owner described his motivations for getting into the shelter business.

“It was a good business opportunity,” he told the magazine City Limits, “and a good way to help people in need.”

Advocates for the poor, however, saw Lapes as part of a wave of profiteers who rousted long-term, low-paying tenants from the kind of SRO buildings that dotted city during the Ed Koch era. In some cases, these flophouses were gainfully repurposed as tourist hotels; at the other extreme, some landlords found the buildings could be more profitably rented to the city as shelters. Records suggest that Lapes and his partners have adopted both strategies, sometimes at the same building according to market conditions—the Hotel Ellington on 111th Street, for instance, was first opened to European tourists and then, after September 11, was turned into a shelter.

That shelter was one of at least two that Lapes opened in properties owned by a New York-based hotel company called Amsterdam Hospitality, to which he maintains an ambiguous connection. The chief executive of Amsterdam, Stuart Podolsky, has a criminal history. In the 1980s, along with several family members, he pled guilty to deliberately moving thugs and prostitutes into his buildings in order to chase off rent controlled tenants, in what the Manhattan district attorney described as a campaign of “terror.”

In 2006, the New York Post reported that Lapes was once a paid employee of Amsterdam Hospitality, according to court records, and described him as “the public face for bona fide bad guys.” As recently as 2011, a permit filed with the city’s Department of Buildings, for work on a boutique hotel called The Bentley, listed Lapes as a “general manager” for Amsterdam Hospitality.

The name of the general counsel for Amsterdam Hospitality, Charles “Chesky” Wertman, appears on the 2001 deed for the building that is proposed to house the Carroll Gardens shelter. He told the Times that he represented Lapes in the sale. (The deed is held in the name of an anonymous shell company.) He called it a “coincidence” that he also happens to be a board member of Housing Solutions USA.

Wertman has not responded to repeated queries from Capital New York. Podolsky did not return a message left with the British-accented receptionist at Amsterdam Hospitality.

Even well-meaning nonprofits, in order to provide beds, have to deal in the real estate market. Shelter contracts can work in a variety of ways. Sometimes a property owner like Lapes bids directly and then subcontracts to a service provider. Sometimes, as is the case in Carroll Gardens, a service provider bids after having identified a property to lease. Few landlords, though, are willing to turn their buildings into shelters. That means the city must pay a premium, sometimes to sketchy characters.

Most shelters, advocates and neighbors say, aren’t the blights they’re made out to be: they spark initial hysteria but quickly blend into the background. Lapes’ shelters, however, have often proved to be the alarming exception. In 2007, the D.A.’s office launched an investigation into his management of the Aladdin Hotel, a shelter for homeless couples on West 45th Street—the one the Daily News called a hellhole.

According to the News, the investigators found that the facility was a venue for rampant criminal activity, including prostitution, gunrunning, even a counterfeiting shop that produced phony ten-dollar bills. A hotel manager was arrested on charges of illegally carrying a .22 caliber pistol, which he claimed he needed for protection, and was reportedly pressured to provide evidence against Lapes, whom the investigators reportedly suspected of defrauding the city. The case fell apart after a key informant quarreled with prosecutors. Lapes denied any wrongdoing, and was never charged.

Shortly after news of the investigation broke, Lapes got rid of the agency that was running the shelter, Aguila Incorporated, a nonprofit connected to a Bronx politician named Peter Rivera. (Aguila has since merged with Housing Solutions USA, and Hess has taken over its contracts.) In its place, he hired a respected service provider, the Bowery Residents Committee (BRC), which cleaned up the shelter’s operations.

Last year, the BRC filed suit against Lapes, claiming he had refused to pay more than $1.5 million in fees due to the agency under its contract. The agency’s complaint portrays Lapes as an erratic landlord who conducted most of his business from his car, frequently engaged in “arguments and altercations” with vendors, and often made payments “by pulling bills out of a large wad of cash that he kept on his person.”

The suit was eventually settled.

Muzzy Rosenblatt, a former acting commissioner of the Department of Homeless Services who is now executive director of the BRC, declined to comment.

According to minutes of a community advisory board set up to oversee the Aladdin, as well as the recollection of Marilyn Rockafellow, then a leader of the local block association, the chief executive of the company providing security at the Aladdin Hotel during the time in question was a former New York firefighter named Daniel Murphy. Murphy, who is said to have provided security services at several other Lapes facilities, is listed as a board member on Housing Solutions USA website, which touts his expertise as a “security consultant, providing security oversight for six New York City residential buildings, including city-run shelters.”

I could not locate Murphy, but I called NJB Security, the Mount Vernon-based firm that, according to court records, held the contract for the Aladdin Hotel.

“I’m not going to comment on anything,” NJB president Frank Maiolo said as soon as I mentioned Murphy’s name. Then he abruptly hung up.

In recent days, several public officials, including City Councilman Brad Lander of Brooklyn, have raised questions about whether Housing Solutions USA is abiding by the city policies, which prohibit board members of city contractors from having “any interest” that “directly or indirectly conflicts with the performance of its contract.”

If the Carroll Gardens proposal is approved by D.H.S.—and knowledgeable sources say that’s close to a foregone conclusion—the owner of the property at 165 West 9th Street, which has long been vacant due to construction deficiencies, stands to make a great deal of money. In recent days, construction workers have been at work inside the apartment building, converting its ten units into enough rooms to house 170 men.

City Councilwoman Gale Brewer, who represents the neighborhood around the West 95th Street shelter that opened earlier this year, told me that building had been divided into cubicle-sized rooms, for which Lapes charged a price, including services, that exceeded Manhatttan’s market rents.

“I don’t think someone should be making $3000 a month for a tiny, tiny room and a bathroom and a kitchen down the hallway and bedbugs,” said Brewer, a frequent critic of Lapes.

Very little is known, however, about what is happening inside the building on West 9th Street, despite urgent calls for further explanation from community groups. On Oct. 24, representatives of D.H.S. and Housing Solutions USA are scheduled to appear at a public meeting in Carroll Gardens.

Beyond whatever moral questions exist about landlords who profit from the plight of the poor, homeless advocates say that the connections between the property owner and his potential nonprofit tenant raise practical issues. Is the West 9th Street property really the best setting for a shelter, or was it chosen because of its well-connected owner? What happens if, as is common in such institutional settings, there are disputes between landlord and the service provider?  (The building, after all, was designed by architect Robert Scarano, an infamous scofflaw, and its history of Buildings Department complaints reveals longstanding concerns of possible deficiencies in its structure and foundation.)

For now, Heather Janik, a D.H.S. spokeswoman, is declining to comment on details of the project, or the department’s ongoing relationship with Lapes and Housing Services USA.

The city agency does appear, however, to have taken one very modest action. Earlier this week, the day after an initial story on the shelter deal appeared in Capital, it sent out a mass email to all its shelter operators. Attached was a memo, dated October 16, outlining the city’s conflict of interest rules.

Read Andrew Rice's previous report on the Carroll Gardens shelter project here.

Andrew Rice

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