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Birches “Will Never Open” Fraud, Kickbacks, Liens, Abuse Alleged

Written By Editor on 5/5/17 | 5/5/17


By Ethan Tanenbaum

The Birches apartment complex in Schoharie “will never open,” according to several key players involved in the project. According to multiple local officials, contractors, and former figures at Birches Associates LLC, owner Steve Aaron is in the words of one former associate, a “bullshit artist” who has no intention of finishing the project.

According to one former site manager, even if all contractors returned full time on site today, the project would take at least “six months.” The project was originally slated for completion in the summer of 2015.

The Mountain Eagle interviewed a number of former central onsite individuals and reviewed County and business records and will follow up as more information becomes available. Several individuals spoke only if unnamed. Aaron himself spoke to us, denying any major issues at the site.

A repeated opinion of people involved is that the Birches apartments will never open, at least not under current developer Steve Aaron. Bob Palombo was the former project manager onsite for four months after the former manager left. He started with a firm statement, “Steve Aaron had no intention of ever finishing the project.” He added, “he doesn’t want to pay people.” Palombo was one of the few contractors that received a check from Mr. Aaron, which bounced. He said he only stayed in order to finish the job to ensure that his employees were paid. “I’ve always felt he’s not a reputable guy. The reason, the problem, with Birches, is him.”

Mismanagement

Palombo said he’s been in the construction business for 31 years and said that the Birches project was conducted completely out of sequence. According to him, not a single contractor received full payment for their work.

According to multiple sources, Bank of America and principal investors are no longer extending credit to Birchez LLC.

Part of the issue was regarding 911 addressing. Birchez LLC cannot complete an evacuation plan or even open a post office box without proper 911 addressing. However, according to Mike Wrubel of Middleburgh, the latest project manager, Aaron intentionally dragged his feet on the process in order to blame local officials.

Wrubel said that there was a repeated cycle of not paying the contractors, then hiring new ones whom would also not be paid.

To this date, Wrubel said, carpeting and flooring is not complete. Neither is painting and sheetrock. It would be at least six months to complete in good conditions, he said.

"You're not going to get any contractors there," he added.

Brad Hoffstatter, a contractor who spent 28 weeks on site, provided more information “It didn’t matter how many construction management companies were there,” Hoffstatter said. Aaron would sit with the contractors and tell them that “I am God.” Wrubel said similarly. Hoffstatter said the project could be completed sooner if the contractors returned, but that none would under Aaron’s leadership.

The developer said that part of the reason for delay is because he wants the site to be the highest quality. He said that just last week, he made the decision to install a better quality refrigerator for fifty additional dollars each, which further pushed back the schedule.

Aaron said that former employees and contractors were “conspiring” against him. Similarly to our February article, Aaron said the only contractors fired on site were let go because of “substandard work.” The developer added that he is now managing the site after another wave of firings.

Liens and Pending Lawsuits

A number of contractors have liens against both Birchez LLC and associated Rivergate Development LLC. They total more than $500,000, according to documents from the Schoharie County Clerk’s Office. There are over 50 documents related to liens in the archive. Aaron denied the number of liens and said that he recently resolved one of the largest ones.

One contractor provided almost two dozen signed contracts which Birchez did not pay in full, to the tune of over $2 million.

Palombo has a lien on the property for approximately $30,000. He said he would be willing to join a potential lawsuit and that the contractors “just want our money. What’s right is right.”

Wrubel echoed the comments, saying that "I highly doubt anyone was paid in full." He said perhaps the retaining wall at the beginning was paid for. Wrubel said there's "always an excuse" with Aaron.

One lien from Universal Contracting & Development is over $214,000. One contractor lost their business after Aaron did not pay him for work. Hoffstatter has about $12,800 in liens.

Fraud

According to Palombo, Aaron has been receiving money through grant and loan processes and not paid workers. Aaron has a nearly $11 million credit line with Bank of America to complete the project.

Several former figures onsite stated Aaron’s goal was to not complete much of the work, but rather segment it out in order to defraud government agencies. They stated that Aaron completes a portion of the project and then gives the state fictitious numbers for reimbursement, which could go completely in his pocket because he doesn’t pay employees.

Aaron stated that any delays were costing him money. When asked whether Bank of America or investors would pull out from the project before it was complete, he said, “The bank has that option but we are racing to the finish line.”

Aaron also said that there is no federal grant money included, except for stipends expected for Section 8 housing.

Rumors swirled that Bank of America forced Aaron off the project, but Aaron said that is not true. He said that he was on site last week and had a site visit Thursday.

Hofftstatter said that Aaron never intended to finish the project. According to him, Aaron said repeatedly that he wanted to “burn the place down.”

Kickbacks

According to Wrubel, money was exchanging hands. "Someone had to be paid off," he said. Hofstatter said that there were discussions onsite regarding Aaron bribing local officials.

Several local officials spoke of bribe offers, with one local government agency holding an emergency meeting to quarantine employees from speaking to Aaron. The fear was that he would offer cash in exchange for favors. Another local official said that Aaron offered him and others bribes in coded language but that none were accepted. One said, “He’s the type to offer you $20,000 and record it.” Aaron flatly denies this allegation.

Part of the fiscal question came from the existence of a number of shell companies, which Aaron appears to use in order to circumvent campaign finance law. Both the Birchez and another company directed by Aaron, Rivergate Development, sent funds to politicians. Rivergate alone donated almost $98,000 to Governor Cuomo's campaigns in 2010 and 2014. Overall, Rivergate donated $184,900 to various politicians. Birchez also formed the Schoharie Senior Housing Development Fund Corporation in 2014, which is now listed as "inactive" by the state.

Abuse

Wrubel said that during his four months on site, Mr. Aaron "treat[ed] everyone like dirt." He personally witnessed several outbursts, both in person and over the phone. The leasing agent alone, he said, was "called every name in the book." Other employees included a number of vulgar expressions witnessed, including c***. Wrubel lost 15 pounds just due to stress during this period. “Definitely put a damper on things in my life.”

Hoffstatter shared voicemails from the developer. “You’re not man enough to talk to me, huh? Call me back, you little pussy!” Another said, “You’re a f***ing coward, hanging up on me? Where are you? Do you want to square with me? Tell me where you are!” Hoffstatter said that “He is much worse than that when he is yelling at everyone.”

Waiting Lessees

Many of the people that signed up for the apartments have been left out in the cold. According to one employee, one woman lost their house in foreclosure waiting for the project’s completion. There were repeated stories of lessees promised to move in, only to have the projected date moved back repeatedly. Some have dropped out from the project altogether.

Wrubel ended his comments by said, “Aaron ended hurting the community, not helping it.”

Bill Kinisky and Matthew Avitabile also contributed information to this article.



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