Mark Nussbaum’s former law firms could be staring down a hole to the tune of hundreds of millions of dollars.
A fiduciary handling the liquidation of the now-shuttered Nussbaum Lowinger and Mark J. Nussbaum and Associates revealed creditors were seeking to collect more than $400 million from Nussbaum’s former law firms, according to new court filings.
The amount of creditors’ claims had not been previously known. Nussbaum’s firms are undergoing an alternative to bankruptcy, known as assignment for the benefit of creditors, to liquidate assets and repay creditors.
The fiduciary is now seeking to obtain a judge’s approval to hire new forensic accountants, citing “limited formalized records, books and ledgers” of Nussbaum’s law firms.
“The lion’s share of the assets and the (Nussbaum) estate’s value likely must be derived through the tracing of banking records and contemporaneous communications,” said Sheldon Eisenberger in a recent filing in New York State Supreme Court.
The creditors are seeking repayment on funds they advanced to Nussbaum’s law firms. Nussbaum is hoping to resolve these claims in civil court, while also facing criminal charges of grand larceny from the Manhattan District Attorney’s office over missing escrow funds. (Nussbaum has pleaded not guilty).
Nussbaum was a real estate transactional attorney with an office in Manhattan. He began using his law firm’s escrow accounts into a conduit for bridge loans. and used investor money to lend to real estate dealmakers. In turn, the investors would make a return and Nussbaum would collect a fee for facilitating the transaction, according to sources familiar with the situation.
But in January, Nussbaum started running a deficit and stopped paying investors.
Nursing home executive Jacob Sod filed a lawsuit in New York Supreme Court, alleging Nussbaum had failed to return $15 million. Lawsuits started piling up as Nussbaum’s clients sought to recoup their money.
In a short time, Nussbaum closed his law firm, Nussbaum Lowinger. Instead of resolving the dispute through bankruptcy, he opted to go through an Assignment for the Benefit of Creditors, or an ABC.
As part of the ABC process, Nussbaum appointed attorney Sheldon Eisenberger to act as a fiduciary to liquidate Nussbaum’s assets to pay back creditors. The process is still ongoing.
Nussbaum’s largest asset is reportedly his accounts receivable, which is related to outstanding debts or loans he provided to real estate dealmakers. Nussbaum is accused of using a tactic referred to as “show capital,” in which he would temporarily deposit money into a real estate dealmaker’s account to make it appear as if the dealmaker was capitalized.
Nussbaum also owned real estate in Chicago. But many of those assets, consisting of small multifamily residential properties in Chicago’s South and West Side, have fallen into foreclosure.
Untangling the web of entities and transactions connected to Nussbaum has proven to be a challenge.
Eisenberger is seeking to appoint Patrick A. Chylinski and David Harkavy of Armanino Advisory as forensic accountants to help trace Nussbaum’s assets and transactions.
Armanino Advisory’s responsibilities include: conducting a forensic analysis of Nussbaum Lowinger’s books and records, preparing a fraudulent conveyance analysis, and possibly filing tax returns, according to Eisenberger’s filing.
Nussbaum’s attorney did not return a request for comment. Eisenberger also did not return a request for comment.
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