By Jena Ardell
By Jon Campbell
By Alan Scherstuhl
By Tessa Stuart
By Roy Edroso
By Jon Campbell
By Albert Samaha
By Zachary D. Roberts
When Debbie first checked into the Malibu Hotel, the linens in her room were marked with bloodstains and cigarette burns. She turned on a faucet and roaches scurried out of the nozzle. But all that wasn't as bad as the night last May, she says, when a Malibu security guard came banging on her door after 3 a.m., demanding intercourse, a blowjob, or both for the right to stay in her room.
Debbie, 33, is homeless and HIV-positive. For five years she has been in and out of the city's HIV/AIDS Services Administration's (HASA) emergency shelter system. But in all that time, she says, one hotel owner has provided the worst accommodations with the fewest services and yet fetches the highest city ratesthe Malibu's Hank Freid.
Freid runs Branic International Realty and a few other companies like 11th Street Associates and Helm's Properties, paper corporations in which his ownership in a handful of illegally converted single-room-occupancy (SRO) hotels has been disguised. Many, like the Malibu, at 2686, 2688, and 2690 Broadway, are riddled with serious code violations; nearly all have been cited for vermin and rats.
But there are no vacancies. For the last year, Freid has been renting rooms exclusively to HASA, a small division of the city's expansive Human Resources Administration (HRA), an agency under court order to find what lawyers and judges call "medically appropriate" sites to house clients in permanent and emergency shelters. Typically, HASA puts up homeless clients in emergency SROs for only 28 days: just long enough for many to get their lives in order, and not quite long enough to obtain tenant's rights. So they move, shuffling in and out of 54 emergency hotels scattered throughout the city.
Debbie lived at the Malibu for three months. "Other hotels don't have these kinds of problems," she says. For starters, the building where she lived, the north wing of the Malibu at 2690 Broadway, is illegal. Currently, it doesn't have a certificate of occupancy (CO), and until mid August, a vacate order issued nine years ago by the Department of Housing and Preservation Development (HPD) was still in force, deeming the property "dangerous" and "unfit for human habitation." Clients complain about toilets that often don't work and interruptions in heat or hot water service.
Still, taxpayers pay Freid a whopping $2400 a month for rooms in the Malibu. That's currently the highest rate, according to HASA's executive deputy director, Jane Corbett, who says that sites are selected for their services, and clients are placed in the cheapest hotels first. However, according to an internal list of all arrangements with SRO landlords, HASA's been paying Freid nearly double what they pay most providers, for many rooms that clients say fail to offer the required services, such as fridges to keep medication cold, fans or air conditioners, and new mattresses, much less the amenities like community kitchens. So far this year, Freid's taken in over $4 million, for five locationstwo of which HASA top officials like Corbett are unaware house their clients.
"It's lunacy," says Jennifer Flynn, director of the nonprofit New York City Aids Housing Network. "We're paying ridiculous rates to house these people in crappy and illegal roomsthe money could be used for permanent housing." That's the goal, but HASA's spending priorities have been duly criticized. In a recent oversight meeting, City Council members grilled HRA Commissioner Verna Eggleston and Corbett about funds mismanaged in fiscal year 2002. Why, they asked, did HASA choose not to spend 15 percent of its allotted budget for permanent housing, but spend 150 percent on emergency placements in unsuitable SROs like the Malibu? There were no answers. Eggleston kept her head down. "I got a lot of fixin' to do," she said.
She might consider starting with Freid. "When the homeless first started coming, I thought we were doing something good for the community," says one of Freid's top employees. "It never happened that way. We're bilking the city for more than you could imaginefor bullshit rooms! Hank has a veryclose relationship with the city."
The city Department of Investigations (DOI), the agency that probes municipal corruption, is currently investigating Freid. "We've received some complaints about the Malibu Hotel and we're reviewing those complaints," said Emily Gest, DOI spokeswoman, in a statement.
Says Rick de Ariaz, a veteran HASA field supervisor: "Since day one, we've never had a clear mission on how and where to house our clients. We put them in places like Dachau, then make multimillionaires out of millionaires who fail to provide what they promise. It's a totally broken social policy."
Freid, like many SRO landlords, tries to keep a low public profile. He doesn't allow photos to be taken of himself, he says. He's not that discreet, though, about the wealth real estate has brought him. He drives three cars, including a Mercedes-Benz S600 and a Range Rover. "We work hard for our money," he says in the lobby of the Trump Palace, his city home. "Why shouldn't we spend?"
Some violations have gone on too long, he admits, but he says rooms are in prime condition. "Why's everybody picking me out?" he says. "I'm the one putting these people up. If it's not me, it's going to be somebody else. I'm bending over backwards. If anything, the city should be paying me more."
Before cashing in on the homeless, Freid catered to a clientele of thrifty tourists. Rooms at the Malibu, and the Broadway Studios, at 230 West 101st Street, were advertised in European countries. According to the tenant board, former guests sent complaints that accommodations were never as promised. And many tourists were charged twice. "I was instructed to take reservations on credit card and only to accept cash at checkout," Greg Warner, former Malibu front-desk clerk, told the Rent Guideline Board this summer. He also testified that Freid used two sets of books to handle the hotel's $12,000 daily intake, cash Freid used to pay workers, including a handyman named "Ziggy," who, without permits, performed the dangerous feat of driving a sledgehammer though the hotel's load-bearing brick walls.
After September 11, the tourist trade bombed. Only one month later, Freid approached HASA, which offered to pay him $70 a night for rooms in the Broadway. Shortly after, he teamed up with SRO owner Urs Jakobs to become HASA's "contact" at the Royal York, at 258 West 97th Street, fetching the same room rate. "Business was dead," Freid says. "I had no choice."
When HASA's clients moved in, the Royal York management cut the building's gas supply for stoves, according to HPD, which cites the hotel for 139 outstanding code violations, including defective toilets, non-working smoke alarms, and the absence of hot water.
Not only are city inspectors unsatisfied. The neighbors are screaming, too. In June, a four-year-old boy stepped on a hypodermic syringe that had fallen from a Royal York window. Sherm Partners, director of the next-door Lotus Garden, where the boy was barefoot, reports he underwent heavy HIV treatment to rid his body of possible toxins. She adds that empty crack baggies, sullied toilet paper, and hundreds of needles have fallen into the garden.
At a recent police meeting about the Malibu, Steve Millington, a resident who lives across the street, was aghast: "I looked up one day and saw two butt cheeks hanging out the windowI mean, the guy actually took a shit out the window!" A woman detailed a more horrifying incident in which a man fell from a Malibu window and cracked his skull.
Advocates frown on housing over 100 HIV-positive clients in buildings without on-site services, but Freid was tapped again, in April, to house over 100 more clients at the Malibu. HASA's mission includes assuring the Malibu's safety. "We inspect all buildings before placing clients," says HRA spokesman David Neustadt. Ilyse Fink, the city Department of Buildings' spokeswoman, says both the fire and building departments have found no reason the Malibu's north wing should be "deemed unsafe." HPD spokeswoman Carol Abrams reports that all the building's safety equipment is up to snuff, including sprinkler systems.
However, on a recent tour, the Voice found not one fire extinguisher (they're often stolen), pull station for fire alarms, or sprinkler head on all five floors of the Malibu's north wing.
"Hank had two fires! You'd think he'd take precautions," says Michael Ouellette, head of the two-member Malibu Tenant Board. (For more on Ouellette's legal travails with Freid and his mysterious dealings with Democratic District Leader Carmen Quinones, see sidebar.) Says Ouellette, "Hank takes cheap to a totally new level."
In August, Freid did apply to legalize 2690 Broadway as a hotel, but according to an internal city inspector's report, Freid and his architectural firm, Leder-Luis Building Design, may have submitted dubious data on the application. The building's existing documentation is for nine rent-stabilized apartments that burned in a string of fires years ago, which Freid then converted into 51 SRO rooms without permits or inspections. Leder-Luis declined to comment.
For at least the last five years, Branic has also submitted bogus applications for work permits, in an effort to preserve the building's residential status. One benefit is the ability to stiff the city on property taxes, experts say. Tax rolls for the Malibu's three buildings this summer show the city taxed Freid for only 55 rooms, estimating the hotel's value at a modest $656,000. The SRO has over 130 rooms. With HASA clients in place, brokers estimate its value at $30 million or more.
"Freid's taking advantage of a system that's ripe to be taken advantage of. Where's the oversight? There is none," says James Muessig, an SRO tenant advocate.
Freid feels persecuted. "Trust me, I was doing a better business before," he says. "I made three times as much with the tourists." Since complaints started about the Malibu, he says, HASA has pulled clients from the north wing. He plans to take bids on sprinklers. "I'm just a novice," he says. "I had no idea what I was getting myself into."
Housing HIV-positive homeless ain't easy, but Freid continues to invest big sums to house more HASA clients. In May, he signed for rooms at 315-325 West 30th Street, a series of rickety buildings littered with expired work permits. That same month, he also purchased the Major East, at 320 East 11th Street, from Vintage Real Associates, and registered the property under a fake name.
Debbie's been relocated to the Major East. The toilets don't work there either, she says, and her chilly room stinks of mold in the grimy carpet. "The problem is simple," she says. "If Hank wants city money, he should abide by city codes."