Tarragon took shortcut to problems with condos

Tarragon took shortcut to problems with condos

South Florida Business Journal - June 30, 2006 by Ed Duggan

A shortcut deemed to be a criminal act has backfired on a prominent real estate developer and its contractor, resulting in fines, house arrest and convictions for a project in Fort Lauderdale.

Tarragon Management's treatment of asbestos at the construction site was considered a violation of the federal Clean Air Act. This was not a mistake, but a criminal act, according to court documents.

The company and its contractor, Fort Lauderdale-based Benco Development, were caught illegally handling and removing asbestos-laced material from the Pine Crest Village apartments in Victoria Park during demolition in 2003 by an asbestos abatement coordinator in the Broward County Department of Planning and Environmental Protection.

A Tarragon spokesman declined to comment further on the actions.

Guilty plea

Tarragon, which is based in Dallas, pled guilty to willful violation of the law and was sentenced, June 15, in U.S. District Court in Fort Lauderdale to five years probation, a $500,000 criminal fine and $500,000 in community service to the Florida Environmental Trust Fund.

Additionally, Tarragon was ordered to develop, implement and enforce a nationwide comprehensive environmental compliance plan for all its operations to meet applicable laws and regulations regarding hazardous substances and wastes.

A court-required independent consultant is to oversee the process during the five-year probation and report to the court and the government annually.

"It shows that both the Fort Lauderdale Building Department and the Broward County Department of Planning and Environmental Protection were both on the job," said Jack McCabe, real estate analyst and CEO of McCabe Research & Consulting in Deerfield Beach.

He said these types of developer actions cause buyers anxiety. They "lose faith in developers and question what else may have been papered over, covered up or hidden in construction."

County warned of asbestos

Documents filed with the SEC show Tarragon said it had incurred legal and other professional fees of $645,000 so far on the Pine Crest project, as well as remediation charges of $795,000 to clean up the asbestos contamination.

It was a sad ending to what started as a solid condo conversion project.

In 2003, William S. Friedman, president and CEO of what was then called Tarragon Realty Investors and is now called Tarragon Corp. (NASDAQ: TARR), Tarragon Management's parent company, said the New York City-based parent company expected to make a $25 million profit over the next two years from converting The Pine Crest Village apartments into a 240-unit condominium. Tarragon Management oversaw the conversion.

Pine Crest was Richard Schaffer's first project for Tarragon and he was named the company's new managing director for Florida condominiums. When Schaffer was appointed, Friedman said in a news release: "Our expanding activities require seasoned and creative executives who can balance risk and opportunity."

Court documents show Schaffer was both the managing director and project manager. He had reports on four environmental assessments and a report and asbestos operations and maintenance program were conducted on the three Pine Crest buildings in connection with financing or potential sale of the property.

Schaffer said in court documents at least one of the assessments was kept in his files and identified asbestos in Building A of the Pine Crest complex.

Tarragon's project manager, Robert Violino, who reported to Schaffer, was responsible for supervising the day-to-day demolition and construction activities on the project.

He submitted building permit applications, including a statement of responsibility regarding asbestos to the city of Fort Lauderdale incorrectly indicating a specified contractor completed a full and thorough asbestos survey, court documents said.

An asbestos abatement coordinator from the county visited the site and asked Violino for a copy of the asbestos survey. Violino requested a copy from Schaffer who apparently gave it to him two days later.

When Violino brought the document to the county office, he was reminded the asbestos in Building A had to be addressed, including a proper, thorough asbestos survey and abatement, prior to any demolition or renovation work. Court papers show Violino advised Schaffer of the county's warning.

Schaffer signed an affidavit and indemnity of mortgagor regarding hazardous or toxic material to Wachovia Bank which had made a $25 million loan on the property. The affidavit incorrectly stated the mortgaged property was presently free of hazardous or toxic materials, defined to include asbestos.

Prior to a visit by company officials, Schaffer asked contractor Benco to begin demolition work on about 10 apartments in Building A, even though work was not scheduled or under contract to be done by Benco. Both Benco and Violino initially objected, but Schaffer repeated his request to complete demolition on some units.

Permit refused
Violino applied for a demolition permit as part of the rehab, but was refused because it lacked an asbestos survey needed before a permit could be issued.

Schaffer said he was not concerned about an asbestos survey, Violino said in court documents, because "a bank had just loaned them $25 million for construction and that the bank would not have done so if there were a problem".

On April 18, 2003, an asbestos abatement coordinator visited the job site and said he witnessed white acoustic-type ceiling material being thrown from an open window of Building A, causing the release of a hazardous substance into the air. Work was stopped and samples taken for analysis confirmed 4 percent chrysotile asbestos present.

Schaffer approved hiring a consultant to remedy the problem.

April 25, the asbestos abatement coordinator from the county returned and saw additional demolition work had been done inside the building and warned Violino the job was in violation of federal law.

April 28, the coordinator returned to find additional demolition took place over the weekend. Charges were soon filed.

Tarragon pled guilty after months of negotiations with federal authorities.

Demolition contractor Benco Development pled guilty to violating the Federal Clean Air Act asbestos regulations and was sentenced before Judge Michael K. Moore on May 25.

Benco was placed on two years probation, ordered to pay a $25,000 criminal fine and pay $25,000 to the Florida Environmental task Force Trust Fund.

In addition, Benco's president, listed in state records as Ben Fillichio, must complete a 40-hour training course on identification and handling of hazardous substances and wastes, including asbestos.

Violino pled guilty to violating the Clean Air Act asbestos regulations and was sentenced before Judge Adalberto Jordan on June 16. Violino was placed on probation for two years, with six months to be served as home detention, and was ordered to pay a $25,000 criminal fine. He must also complete a 40-hour training course regarding identification and handling of hazardous substances and wastes, including asbestos.

A Tarragon spokesman said the company no longer employs Violino.

Schaffer pled guilty to violating the Clean Air Act and his sentencing is set for 8:30 a.m., on Aug. 17.

A Tarragon spokesman said Schaffer was still employed by the company, "but no longer has responsibility for supervising renovations, development or construction."

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