New York City real estate, particularly the luxury market, is a popular refugee for world’s corrupt, self-dealing public servants and the crooked businessmen who bribe them. China cracked down on wealthy citizens seeking to stash their wealth in international real estate by adding several deterrents to its capital controls earlier this year (Among them, Chinese investors moving money out of the country must now sign a pledge saying it won’t be used to buy real estate, or investment securities). Shortly after, the New York real-estate – literally half a world away – was rattled by a crush of stalled deals.
So, it’s unsurprising that the mystery behind the largest residential foreclosure auction in NYC history would have this kind of sordid backstory. Last month, we met Kola Aluko, a Nigerian oil magnate and the purported owner of One57’s Apartment 79, a $50 million apartment that will be sold next week in what appears to be the largest foreclosure auction in New York City history.
And now the US government has added a new twist: In a lawsuit filed Friday in Houston by the Justice Department’s Kleptocracy Asset Recovery Initiative, the Feds are seeking to recover $144 million in assets, including proceeds from a luxury condominium on Manhattan’s Billionaires’ Row in New York, which prosecutors claim were spoils from bribes paid for Nigerian oil contracts, according to Bloomberg.
The targets of the suit were none other than Aluko and another Nigerian businessman, Olajide Omokore. However, judging by the government’s price tag, Aluko’s assets – including the One57 condo and Aluko’s $80 million yacht, 213-feet (65 meters) luxury yacht the Galactica Star – appear to be the focus of the suit. In the past, Aluko would frequently rent out his yacht to his friends. In 2015, Jay-Z and Beyonce rented it for the bargain-basement price of $900,000 per week to sail around the Mediterrainean.
The Justice Department alleges that two Nigerian businessmen made corrupt payments to a Nigerian official who oversaw the country’s state-owned oil company in exchange for contracts, according to Bloomberg. The official used her influence to direct contracts to two of their shell companies — Atlantic Energy Drilling Concepts Nigeria Ltd. and Atlantic Energy Brass Development Ltd. — through a subsidiary of the Nigerian National Petroleum Corp, according to the complaint. The companies failed to abide by the terms the contracts, yet were permitted to sell more than $1.5 billion worth of Nigerian crude oil, the U.S. alleges. They then laundered the money through the US.
“Corrupt foreign officials and business executives should make no mistake: if illicit funds are within the reach of the United States, we will seek to forfeit them and to return them to the victims from whom they were stolen,” Acting Assistant Attorney General Kenneth Blanco said in a statement.
The Justice Department’s recovery lawsuit comes just days before Aluko’s penthouse at One57, one of Manhattan’s most expensive buildings, is scheduled to be sold at a foreclosure auction forced by his mortgage lender, the Luxembourg-based Banque Havilland SA, which said in court filings earlier this year that he failed to pay back the full loan amount in September.
As we’ve previously noted, Aluko took out an ‘unusually large’ ($35.3 million) mortgage with an even more unusual term: one-year.
Aluko’s condo is a full-floor, 6,240-square-foot (580-square-meter) penthouse that was the eighth-priciest sold in the building located at 157 W. 57th Street, just across the street from Carnegie Hall, according to real estate data firm PropertyShark.
Now of course one lawsuit doesn’t necessarily prove that a market is infested with criminality, but the opaque nature of real-estate transactions, and the ease with which buyers and sellers can conceal their true identities behind LLCs, make buying real estate in a market like NYC an attractive option for any would-be money launderer.
And while one foreclosure certainly doesn’t signal that the market is collapsing, there are other more worrying trends in NYC luxury real estate. As we’ve previously noted, buildings like One57 are struggling with unsustainable vacancy rates. To wit: Nearly 40% of apartments in one comparable building remained on the market years after it had opened.
As Bloomberg points out, One57, along with a cluster of ultra-high end luxury buildings around Central Park collectively known as “Billionaire’s Row,” has become a symbol of New York’s luxury-development boom — and eventual slowdown. The tower, which broke ground in 2009, drew investors willing to pay large sums for lavish residences they rarely lived in, inspiring other developers to build similar offerings, creating an effective “Billionaires’ Row” along West 57th Street. One57 still holds the record for the most-expensive residential sale in New York in December 2014 at $100.5 million.
The bribes were paid between 2011 and 2015 to Diezani Alison-Madueke, then Nigeria’s minister for petroleum resources, according to the complaint. The defendants are accused of spending millions to fund a lavish lifestyle for Alison-Madueke. They acquired real estate in London that was used by the minister and her family, and bought her more than $1 million of furniture and artwork from several stores in Houston, Texas, the complaint said.
We wonder: In what tony neigborhood is her apartment?