Developer Alleges Conseco Rigged Sale of N.Y. Building

By Chad Bray | August 15, 2006

Billionaire real-estate developer Sheldon H. Solow filed a federal lawsuit last week against insurer Conseco Inc. and one of its subsidiaries, alleging an auction to sell the General Motors Building in Manhattan in 2003 was rigged.

In the lawsuit filed in U.S. District Court in Manhattan, Solow alleges that he submitted the “best and highest credible bid” for the building on Fifth Avenue near the southeast corner of Central Park, but that the property was awarded to entities controlled by rival developer Harry Macklowe.

The complaint claims that the Macklowe entities failed to submit a bid prior to the auction deadline and that they submitted an inferior bid afterward.

The lawsuit alleges that Carmel, Ind.-based Conseco or its indirect subsidiary, Carmel Fifth LLC, contacted Macklowe after the auction was complete and told Macklowe that the GM Building “would be his” if he was prepared to pay the $1.4 billion offered by Solow.

“Defendants simply handed the GM Building to Macklowe in a secret transaction and then attempted to cover up the fraudulent scheme by issuing a joint press release and causing statements to be made that falsely portrayed Macklowe as having participated in and won the auction process,” the complaint alleges.

The lawsuit claims that Conseco conducted a “sham auction” and used Solow as an unwitting “stalking horse” to set the price.

A Conseco spokesman declined to comment when contacted on Monday, saying the company hadn’t yet seen the lawsuit. A spokesman for Macklowe declined comment on Monday.

Solow previously filed a lawsuit in Delaware Chancery Court in 2003, in an attempt to stop the building’s sale. The suit was withdrawn after the Delaware court refused to grant an injunction stopping the sale.

Leslie Dick Worldwide Ltd., another rival bidder for the building, filed its own lawsuit in New York State Supreme Court in Manhattan earlier this year, claiming that it was the high bidder for the GM building and that the auction process was rigged.

The building serves as the home of CBS’s “Early Show.”

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