Real estate attorney Mitch Kossoff admitted in a Manhattan courtroom Monday to defrauding clients over a three-year period. It closes a chapter on a curious scandal that has unfolded in snatches since Kossoff became AWOL eight months ago and $ 14 million disappeared from escrow accounts.
âI have defrauded several clients of my law firm,â Kossoff said, facing three counts of robbery and one of conspiracy to fraud. He faces up to 13 and a half years in prison but remains free pending his conviction, which is scheduled for April 6.
A handful of friends were in court to give moral support to the disgraced lawyer, who wore a black sweater, black jeans and black Doc Martens with bright yellow laces. With a bit of gallows humor, he mentioned that he wished the Yankees would win another World Series, but that he might not be able to see it.
Kossoff, 64, had fallen out of sight in April, prompting panicked questions from clients of the prominent real estate lawyer about the destination of the millions of dollars he was charged to hold. Details on the location of the money were not disclosed to the court on Monday.
The crime threw Kossoff’s law firm, Kossoff PLLC, into bankruptcy, whose proceedings were hampered by the refusal of Kossof and his lawyer to hand documents to the trustee responsible for settling the firm’s accounts.
When he attended the video conference bankruptcy hearings, Kossoff turned off his computer camera.
Kossoff’s criminal defense attorney Walter Mack argued that since his client was under criminal investigation, handing over the requested documents would violate his Fifth Amendment rights. In November, the bankruptcy judge found Kossoff in contempt of court and told him he could avoid jail by handing over the requested documents.
About a week later, Kossoff agreed to surrender and plead guilty to charges laid by Manhattan District Attorney Cyrus Vance.
Clients, including GFI Capital Resources of Allen Gross and Urban American Land of the Laboz family, allegedly gave Kossoff large sums of money to be kept in escrow accounts, to be released on their instructions.
Experts said The real deal that these kinds of accounts can be risky. Clients remit large sums based almost entirely on their trust in the lawyer. But as the Kossoff case proved, these funds can easily be misappropriated.
Most law firms have controls in place to protect against abuse. Many escrow accounts, for example, require authorization from two signatories in order to relinquish funds. However, in single-practitioner law firms like Kossoff’s, often a single person controls millions of dollars in these accounts.
Kossoff is well known in the real estate industry, especially with owners of large multi-family rent-stabilized portfolios such as Steve Croman of 9300 Realty, Terrence Lowenberg and Icon Realty Management of Todd Cohen and Stellar Management of Larry Gluck.
He was considered an expert on state rent regulation laws and used his knowledge of the intricacies of the system to the benefit of his clients.
In his spare time, Kossoff gave a spin class at a gymnasium near his office near City Hall. Some of his clients attended the exercise sessions frequently.
As his scandal unfolded, it became clear that the lawyer had been struggling financially for some time before cutting communication with his clients and employees in April. As early as the summer of 2020, Kossoff began withdrawing millions of dollars in cash advances to merchants, essentially a corporate version of a payday loan, which he agreed to pay off at a hefty cost.
Kossoff’s mother, 94, accused him in court documents of forging his signature on some of the loan documents.
Her disappearance not only shocked customers, but left her colleagues and staff dry. The firm, which employed around 30 lawyers, closed its doors overnight.