Quonset at 829 Broadway is a property involved in NMS's litigation.



A federal judge has allowed a RICO (Racketeer Influenced and Corrupt Organizations Act) case to move forward against Santa Monica’s largest developer, NMS Properties, its CEO Neil Shekhter and his wife, Margot. The RICO case is currently on hold while a dueling lawsuit makes its way through local courts but will resume when it’s over.

“We are grateful to the court for putting in so much time and effort to get this right, and we look forward to presenting these claims to a jury after the stay is lifted,” said James Fogelman, a partner at Gibson, Dunn & Crutcher LLP, which represents Boston-based hedge fund AEW in the lawsuit against Shekhter and NMS.

It could be years until a resolution is reached. Last week, Judge Gary Klausner denied NMS’s three motions to dismiss and stayed the corruption case until a separate lawsuit involving NMS and AEW works through an appeal in Los Angeles Superior Court.

“Although the lawsuit is completely frivolous and just another attempt by the East Coast Hedge Fund to take all the profits that NMS earned from developing and managing this portfolio, we understood that our motion required the judge to presume all of the ridiculously alleged facts were true – an extremely high procedural burden that is very rarely met,” NMS Spokesperson Eric Rose said in an email to the Daily Press. “Despite knowing the extremely difficult odds, we remain disappointed and disagree with this decision and feel that California’s anti-SLAPP statute was intended to prevent exactly this type of litigation.”

The cases involve a joint venture agreement (JVA) between NMS and AEW worth half a billion dollars. Back in December, a Superior Court Judge ruled Shekhter committed a “broad variety” of fraud and forgeries, destroyed evidence and presented a fabricated contract to the court in an effort to alter the buy/sell provision in the agreement to his benefit. Shekhter has appealed the ruling, but in the meantime ceded control of nine properties – seven in Santa Monica – to a third party, Lincoln Property Company. The properties include 1447 Lincoln Blvd, which is currently under evacuation orders after an electrical fire in May. At the moment about 120 residents are still displaced.

In the federal RICO case, AEW alleges that Shekhter attempted to strike fear into AEW and potential buyers of the property of significant economic loss and protracted legal battles if they became involved in the venture. In their motion to dismiss, NMS attorneys described the actions as “hard bargaining.” In addition, AEW alleges that Shekhter forwarded the document later determined to be a forgery to lenders, amounting to bank fraud.

The properties in question have been sold to a San Francisco developer for about $430 million, much less than their market value. The properties include: the Lido at 1440 5th Street, Quonset at 829 Broadway, Lincoln Walk at 1447 Lincoln Blvd, San Marco at 1420 5th Street, Rapallo at 1430 5th Street, Luxe Broadway at 1502 Broadway and 1511 15th Street. One other property is in Los Angeles: 9901 Washington Blvd, and another is in West Hollywood: Luxe La Cienega at 375 N. La Cienega Boulevard.