Newark records reveal the art of the cozy land deal
Monday, June 25, 2007
BY IAN T. SHEARN
Star-Ledger Staff
Soon before he left office in 2002, Newark Deputy Mayor Alfred Faiella
redrew the city's redevelopment boundaries, adding acres of land to
the list of vacant properties Newark was willing to sell at discount.
The city sold 53 of those tracts in the West Ward two years later to a
company half-owned by one of Faiella's close friends, Joanne Harz. Her
firm paid $1 a square foot for the parcels, roughly 25 times less than
the going rate for vacant Newark land at the time, according to an
analysis of property records.
The next year, Harz gave $338,000 to Faiella's ex-wife. In a
deposition, Randy Faiella described the money as payment for a land
deal but said she could not recall details of the transaction, such as
which parcel it involved or when it occurred.
But both she and Harz used the same lawyer to finalize the deal: Al
Faiella.
There is no evidence linking any official action by Faiella to his
ex-wife's windfall. But Harz's purchase of city land, discovered in a
recent review of public records by The Star-Ledger, highlights the
longtime mingling of money, power and real estate deals in Newark.
As director of housing and economic development, Faiella was among
Mayor Sharpe James' most influential deputies, a gatekeeper whose
blessing or disapproval of a proposal could singularly transform
neighborhoods in New Jersey's largest city and, in the process, make
builders rich.
Last month, a bankruptcy trustee accused Faiella of enriching himself,
alleging he used his influence to make millions of dollars in real
estate deals but hid his transactions and assets in the name of his
ex-wife.
At the same time, the FBI and federal prosecutors have been reviewing
Newark land deals during James' tenure, considering whether to bring a
corruption case against the former mayor. Earlier this month, they
notified James he is a target of their grand jury investigation.
No one has been charged. James has denied any wrongdoing.
Harz and the Faiellas did not respond to calls and e-mail messages
from The Star-Ledger seeking comment. None has been named publicly as
subjects in the James investigation.
But among the city records agents have subpoenaed were Faiella's
personnel file and documents related to land sales he approved.
A native of Newark, Faiella worked for the city for a quarter-century.
Now 56, he resides in Monmouth County but maintains a law office in
downtown Newark. In October 2005, he filed for bankruptcy, claiming he
owed creditors more than $4.5 million that he couldn't pay.
Faiella and his wife, Randy, divorced in 1992 but still live together
in her house in Marlboro. Faiella has known Harz for more than two
decades; in one deposition this year, he described her as his "lady
friend."
A former Newark educator, Harz has worked with or for others who have
profited by buying, rehabbing and selling property in the city. She
was an agent for developer Manuel Rosa and was once a 25 percent
general partner in a nonprofit company, Heller Development.
In 2000, Faiella approved a plan to let Heller Development buy a
27,000-square-foot city lot along the Belleville border for $205,000.
The next year, Heller sold the tract to BP North America, which
operates gas stations, for $700,000.
REMAPPING THE WEST
Harz took on another role as developer in 2002, when she formed a
partnership with builder Antonio Perez, public records show.
Their venture, JHTP Development Co., had one purpose: to build
multifamily housing in Newark's West Ward redevelopment zone. The zone
covers more than 600 properties in a swath of city blocks that for
years has been plagued by blight.
In 2001, as Faiella's city hall career was nearing an end, he proposed
an ordinance to re-map and expand the West Ward zone. That meant
expanding the number of vacant properties the city would sell to
buyers who promised to redevelop them.
After the City Council approved Faiella's proposal, Harz and Perez's
company applied to buy 53 of the lots -- totaling nearly three acres
-- for a housing development they called Javier Homes, city records
show. The council approved the deal in September 2002; JHTP took
control of the property a year later.
Harz and Perez's company paid the city $122,892 for the land, or $1
per square foot. By comparison, the average sales price of
privately-owned vacant lots in Newark at the time was more than $29.50
a square foot, according to an analysis of all fair market transactions.
Over the next year, Harz gradually sold her share in the land back to
Perez, for $12,455. He built at least 30 homes on the properties and
sold them for $12.4 million, earning more than $7 million in profits,
records show. (Telephone calls to Perez and his attorney seeking
comment were not returned.)
That same year, 2004, Harz paid $338,000 to Randy Faiella, according
to Randy Faiella's tax return, which was introduced during her
ex-husband's bankruptcy case. Under questioning during one of the case
hearings, Randy Faiella said the money stemmed from a real estate deal
but said she couldn't recall any details.
The Star-Ledger examined state property records from 2001 to 2006, but
found no evidence of any sales between Harz and Randy Faiella or
companies they controlled.
During her ex-husband's bankruptcy trial, attorneys asked Faiella
about the dealings between his ex-wife and Harz. Faiella refused to
discuss it, citing attorney-client privilege because he said he
represented both women in the land transaction.
OTHER CLAIMS
For almost two years, Faiella has been trying to erase his debts in
bankruptcy court. He claimed his $4.5 million in debts stemmed mainly
from bad real estate deals dating to the late 1980s.
Earlier this month, he won one round in the battle, when a judge
rejected a claim by one creditor that Faiella and his wife conspired
to hide their assets. But two more hurdles remain.
Another creditor has also claimed Faiella hid his assets with the help
of his ex-wife, Harz and others. And a court-appointed trustee in the
case, Daniel E. Straffi, filed his own complaint, accusing Faiella of
abusing his authority and using his ex-wife as "a conduit to acquire
assets."
Those claims are pending.
In December, agents subpoenaed city records of several key James
aides, including Faiella, according to copies of the subpoenas viewed
by The Star-Ledger. Faiella has since retained a former federal
prosecutor, Alain Leibman, to represent him. Leibman acknowledged that
he and the firm were hired by Faiella, but declined to elaborate.
Last week, Essex County College disclosed that James would step down
next month from his $150,000 post as head of its Urban Issues
Institute, a job he accepted after leaving the mayor's office.
James also did not seek re-election to his state Senate seat.
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