Finance

Schneiderman Investigates Manhattan Club Timeshare Scam

July 29, 2014
By Stephanie West

New York, NY – Attorney General Eric T. Schneiderman has announced that he obtained a court order halting sales of timeshare interests at the Manhattan Club, a luxury hotel in Midtown Manhattan. The order requires that the club’s principals, Ian Bruce Eichner, Leslie H. Eichner, and Stuart P. Eichner, testify in court about the club’s practices and produce documents to the Attorney General’s Real Estate Finance Bureau about allegedly fraudulent sales tactics.

The order also bars the corporations through which the club and the developers act from draining bank accounts connected to the hotel during the investigation. The Manhattan Club is further barred from foreclosing on timeshare purchasers, who the Attorney General alleges were lured into investing with false promises.

The Attorney General’s investigation was spurred by complaints from people who paid tens of thousands of dollars to become Manhattan Club “owners” but have been unable to make reservations due to a claimed lack of available rooms by the hotel’s operators. At the same time, rooms in the Manhattan Club are being rented over the internet to the general public. About 14,000 people currently own timeshares in the hotel’s 286 suites.

In April and May, the Attorney General sent undercover investigators to record the Manhattan Club’s “Vacation Ownership Experience” sales presentation, held at the club. Investigators found evidence indicating that the Manhattan Club’s sales tactics amounted to a bait-and-switch scheme. Prospective purchasers were baited by a relentless sales pitch that includes a number of misleading promises, including that ownership in the Manhattan Club is “better than money in the bank.” Prospective buyers were also allegedly told that the club does not rent rooms to the general public, that reservations are easy to make, and that few restrictions apply to reservations by owners. 

The switch comes after a purchase agreement is signed, when a new owner learns from an offering plan — which was illegally withheld prior to the purchase — about the difference between what they were promised in the sales presentation and what they actually bought.  For example, contrary to the club’s explicit promises, room availability to owners is limited by the renting of rooms to the general public. That means that all reservations are subject to availability and owners, in some cases, have not been able to use any of the time they purchased. Further, the owners’ annual common charges have jumped approximately 200% in the last ten years– to about $2,000 per ownership interest per year. Some frustrated owners have sold their ownership interests back for a mere $1, just to escape the burdens of paying these charges. 

“When sellers use high-pressure tactics to sell timeshares, consumers should be wary that they may not be getting what they were promised. We allege that the Manhattan Club, near New York City’s iconic Carnegie Hall, is a particularly stark example of such a bait-and-switch timeshare scheme,” Attorney General Schneiderman said. “We will use all the tools at our disposal to protect customers from unscrupulous scammers and predatory businesses and hold New York developers to the promises they make, whether orally, in their sales pitches or in their formal offering plans.”

July 28, 2014

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