Banker blamed in 2008 financial crisis sues co-op for causing ‘severe financial hardship’
Former Bear Stearns CEO James Cayne — the Wall Street exec whose “weak corporate governance” has been blamed in the 2008 financial crisis — is suing the board of his fancy co-op for causing him a “severe financial hardship” of his own.
Cayne claims his co-op board at 501 Park Ave. has blocked him from selling his sixth-floor apartment, spitefully rejecting three potential buyers.
The sprawling home inside the white-glove building went on the market in 2013 for $15 million — and has since tanked in price, dropping to $10 million.
But Cayne’s Manhattan Supreme Court lawsuit claims that the board has been maliciously blocking the sale over the course of three years because of a 20-year-old dispute he had with board member Lawrence Friedland.
According to the filing, the row was sparked in 1999 when Cayne forced the board to sell two “maid’s rooms” through a live auction, rather than a sealed bidding process Friedland had hoped for.
Cayne and his wife, Patricia, subsequently got into a bidding war with Friedland — now head of the board — which drove up the cost of the room Friedland purchased, the filing states.
“As a result of their inability to sell their unit, they have suffered significant financial loss and have been deprived of virtually all of the value of their unit,” the suit says of Cayne and his wife.
The ex bank boss is now demanding access to the board’s books and records to find out why it rejected three prospective buyers — which he says was done without explanation — and why it denied his request to rent out the unit.
“Friedland’s personal animus against the Caynes has resulted in the board repeatedly using its decision-making authority to harm the Caynes, and in a manner that is wholly inconsistent with its decisions concerning similar issues raised by other shareholders,” the lawsuit alleges.
According to the final report of the federal Financial Crisis Inquiry Commission, the over-leveraged Bear Stearns tanked — presaging the financial crisis — due to “weak corporate governance and risk management,” along with the lack of oversight by federal regulators.
“In a time of crisis he flatly wasn’t up to the task,” wrote Alan “Ace” Greenberg — who helmed the bank prior to Cayne — in his 2010 book, ‘The Rise and Fall of Bear Stearns.’
The Caynes purchased the nearly 5,000-square-foot unit in 1981 for $1.1 million, when Cayne was still rising through the bank’s ranks.
The couple moved out in 2013, and tried to sell the unit and one maid’s room with Manhattan power broker Dolly Lenz, who listed it first at $14.95 million, and later at $10 million.
“It is a beautiful, grand prewar home in an ideal location right around the corner from one of NY’s best buildings, 520 Park Avenue, where sales and asking prices can exceed $100,000,000,” Lenz told The Post.
A $9 million offer submitted to the board in March, 2016 was declined by the board — as was an $8.7 million offer submitted in May that year, the court filing says.
This May, an offer of $6 million was allegedly submitted — and rejected by the board. The prospective buyer countered with a new offer of $6.75 million but was again turned down, according to the filing.
A letter sent in June to the Caynes from an attorney representing the 510 Park Avenue Corporation said the board gave the first and second offers “careful consideration” and “made a thorough review of the application, as it did with regard to the 2016 applications,” the lawsuit says.
The letter offered no explanation for why the offers were rejected, instead noting that “all decisions by the board are strictly confidential and we are therefore unable to comment further,” the lawsuit says.
In 2008, Cayne splashed out more than $28 million on two condos at the renovated Plaza Hotel, according to city records.
Although they have not lived at the Park Avenue property for six years, the couple said they continued to pay more than $9,000 per month in maintenance fees.
Furthermore, they claim they have suffered significant financial losses in the years they had been trying to sell, and had been “deprived of virtually all of the value of their unit.”
They requested access to the co-op’s books back in July, but the corporation allegedly failed to respond, the lawsuit says.
Marc Kasowitz, an attorney for Cayne, said there were “serious questions” raised by the board’s rejection of prospective buyers, and the board’s “refusal to even respond to Mr. Cayne’s books and records demand only confirms as much.”
Cayne is seeking legal costs and other relief, in addition to access to the co-op’s books.
Reps for Friedland and the co-op board did not immediately respond to a request for comment.
Cayne and his wife now split their time between Long Branch, NJ and Boca Raton, Fla., according to the Wall Street Journal.
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