Former Newcastle Operations Head Accused of Massive Rent Deregulation Scheme
The New York attorney general has filed a lawsuit against David Drumheller accusing him of profiting in a $1.2 million kickbacks scheme.
NEW YORK CITY—The New York Attorney General has accused the former head of operations at Newcastle Realty Services of fraud. Letitia James alleges that David Drumheller and other Newcastle employees illegally deregulated hundreds of rent-stabilized apartments in a scheme to make larger profits with free-market rents.
A recent article written by Jason Grant at GlobeSt.com’s sister publication, ALM’s New York Law Journal, reports on the case. The attorney general says Drumheller and another former employee of Newcastle who is not a named as a defendant received $1.2 milion in kickbacks from contractors used in the scheme.
Prosecutors say Drumheller and at least one other employee with contractors would set labor costs for renovations at artificially high amounts, calculated to allow rents to be raised high enough to remove them from rent regulation protections.
Under the Individual Apartment Improvement rent-stabilization laws owners can increase regulated rents based on a formula that accounts for the costs of the renovations.
Drumheller has denied any wrongdoing. Newcastle says it was unaware of any of the Illegal actions and has been cooperating with prosecutors.