Manhattan District Attorney Robert M. Morgenthau announced today the guilty plea of a Long Island man for evading taxes on compensation he earned in connection with the 2005 sale of the Riverside South Properties by Hudson Waterfront Associates, one of the largest real estate transactions in New York City history.

The defendant, BARRY D. GROSS, 46, pleaded guilty today to the crime of Failure to File Unincorporated Business Taxes, a class A misdemeanor.  The guilty plea concludes an investigation led by the District Attorney’s office which revealed that GROSS, a key player in the 2005 sale of the Riverside South Properties, failed to pay all taxes due on a $1 million bonus he received in compensation as a result of the sale.  GROSS served as the intermediary between the majority owners, located in Hong Kong, and the purchasers, Extell and the Carlyle Group. The deal was finalized in November 2005 for a total price of $1.76 billion.  For his role in the sale of the property, GROSS was paid a $1 million bonus. To avoid the complete tax liability that would have been owed, GROSS requested his bosses in Hong Kong to label the $1 million bonus as a fee payable to a shell corporation GROSS controlled, Itamar Capital, and which GROSS formed after the completion of the Riverside South deal.  This falsification of Hudson’s business records allowed GROSS to receive the $1 million through Itamar thus evading New York City and State taxes.  After learning of the criminal investigation, GROSS attempted to conceal his fraud by filing amended tax returns; however, the amended returns evaded the payment of unincorporated business taxes. Furthermore, the returns filed the following year were fraudulent as well. Knowing that his returns were false and that he owed money to the city and state, GROSS nevertheless cashed a New York State refund check he had received. 

GROSS will be sentenced in February 16, 2010 to a conditional discharge on the condition that he repay the outstanding taxes, interest and penalties that are owed to the city and state on the $1 million bonus.  The total outstanding tax liability is $68,092 plus interest and penalties and depending on which fines are imposed, the total repayment may range from $119,000 to $135,000.  In addition, a condition of GROSS’s plea was that the Hong Kong finder involved in the deal be required to pay $5 million in city and state taxes on the $17.5 million finder’s fee that was earned in connection with the sale of the properties.  The investigation into further aspects of the sale of the Riverside South Properties has been concluded.

Mr. Morgenthau thanked New York State Department of Taxation and Finance Acting Commissioner Jamie Woodward and Chief Auditor Tommy Chan as well as the New York City Department of Finance Commissioner David M. Frankel and Tax Manager for the Office of Tax Enforcement Michael Schenk. 

Assistant District Attorney Jeannette Molina, Deputy Chief of the District Attorney’s Frauds Bureau, along with Assistant District Attorney Frank Mazzarelli, presented the case to the Grand Jury under the supervision of Frauds Bureau Chief Michael Kitsis. Senior Investigator Patrick McKenna, under the supervision of the District Attorney’s Investigation Bureau Chief Joseph Pennisi and Assistant Chief Terrence Mulderrig, and Financial Investigator Nicholas Cangro of the District Attorney’s Financial Crimes Bureau, under the supervision of Chief Frank Puma, assisted in the investigation. Investigative Analyst Claire Botnick also assisted in the investigation. 

Defendant Information:

BARRY DAVID GROSS, 10/14/1963
4 Forest Lane
Lawrence, New York

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