Manhattan’s billionaire condo buyers would lose the ability to keep their identities secret in real estate deals if a measure before Governor Kathy Hochul becomes law.
Limited liability companies have been listed in public records as the buyers of countless New York luxury apartments—almost all of the deals legitimate. But it’s also well-documented that the secrecy of LLCs makes them useful in concealing financial crimes. By the end of next week, Hochul must sign or veto a bill that would create a public database of shell companies, unmasking their rich, famous and sometimes criminal owners.
Advocates argue the measure would root out so-called bad actors who hide behind LLCs to launder money—such as financier Jho Low, whose penthouse at Manhattan’s Time Warner Center was seized in a U.S. government corruption probe. But opponents say it’s a violation of owners’ privacy, and an unnecessary move that would duplicate a similar federal law taking effect on Jan. 1.
The state bill “will probably help TMZ more than anyone else,” said Leonard Steinberg, a Manhattan-based sales executive at the real estate brokerage Compass, suggesting a database would be better for paparazzi tracking down celebrity addresses than officials fighting crime.
'Money Laundromats'
Over the past two decades, a handful of criminals, many of whom aren’t U.S. citizens, have poured their ill-gotten gains into some of Manhattan’s priciest condo projects, known for their lax vetting of buyers. That’s turned some apartments into what Treasury Secretary Janet Yellen called “money laundromats on the 81st floor”—homes that stay vacant while their owners with ties to corruption safely bank their riches.
Hochul hasn’t hinted at how she’s leaning on the state measure, called the LLC Transparency Act.
“It’s one of the many bills I’m still looking at,” she told reporters on Dec. 11.
The powerful Real Estate Board of New York has lobbied against the bill in Albany, arguing it “risks weakening New York’s economy,” said Zachary Steinberg, senior vice president of the trade group.
Professionals in the industry are broadly opposed to the measure, concerned it would deter not just money launderers but also those who have perfectly legal, and often personal, reasons to shield their identity. LLCs can also protect business and property owners from certain legal, safety and reputational risks.
“It’s going to push buyers back who don’t want people having access to that information,” said Frances Katzen, an agent at Douglas Elliman Real Estate. “The reason that these LLCs have been so beneficial is it’s allowed people to buy in New York—a pied a terre, or someone who’s famous, or someone who’s really exposed financially and is known—with privacy for their families.”
Need For Transparency
The measure’s supporters, from good-government groups such as Common Cause and unions including 1199SEIU and the New York AFL-CIO, say privacy concerns should take a back seat to the need to fight financial crimes and corruption.
“If people know they have to disclose who they are behind these entities, it might actually deter wrongful conduct,” said Maria Vullo, former superintendent of New York’s department of financial services.
Across the state, just 7% of properties are owned by LLCs, while in Manhattan, the share is 37%, according to Reinvent Albany, a watchdog group that advocates for the bill.
“It’ll make it harder to sell high-end real estate to people who want to launder their money,” said John Kaehny, Reinvent Albany’s executive director. “That’s the crux of this issue.”
Public access to a registry will help people who have traditionally needed to take legal action against LLCs to figure out who’s behind them and get problems resolved, supporters say. The database, for example, could aid tenants in dealing with unresponsive landlords, or workers fighting for back pay.
“All of us need transparency,” said Assemblymember Emily Gallagher, a sponsor of the bill who represents part of Brooklyn. The public database is more “efficient” than a system that would only give government officials access to owners’ names, she said.
Potential Fallout
One argument against the bill is it would be redundant with the U.S. Corporate Transparency Act, which takes effect next year. Under that law, companies are required to report to the Treasury Department the identities of beneficial owners with at least a 25% stake in the entity’s interests. The registry will be accessible to federal and local government officials for activities related to national security and law enforcement, as well as to financial institutions and their regulators in certain circumstances.
The state measure’s opponents also have warned of detrimental fallout from public disclosures.
“When you have a list of personal information in a publicly available database, it can be used by hackers, it can be used by foreign entities, it can be used by people to intimidate, to harass, to discriminate,” said Ashley Ranslow, New York State director of the National Federation of Independent Business. “You’re opening up businesses and small business owners to a host of really serious problems.”
This article was provided by Bloomberg News.