Riverhead IDA’s law firm, representing companies suing Triple Five affiliate, says company is ‘sham vehicle’ used by principals to dodge liability

Nixon Peabody, legal counsel to the Riverhead Industrial Development Agency, has in federal court filings accused Nader Ghermezian and other members of the Ghermezian family of operating Triple Five Worldwide LLC as a “sham vehicle” to shield themselves from personal liability.

While Nixon Peabody is the Riverhead IDA’s retained counsel for general matters, in September, the IDA hired Nixon Peabody to act as “transaction counsel” in the agency’s review and vetting of Calverton Aviation & Technology LLC, “a single-purpose entity” affiliated with Triple Five Group that is in contract to buy 1,644 acres of industrial land inside the Calverton Enterprise Park from the Town of Riverhead for $40 million. CAT has applied to the Riverhead IDA for financial assistance to complete the proposed first phase of industrial development at the enterprise park.

Last month, the IDA reversed itself and replaced Nixon Peabody as transaction counsel for the CAT application with a new firm, Phillips Lytle. That move followed a RiverheadLOCAL report in October that Nixon Peabody had previously represented another Triple Five affiliate in connection with the American Dream mall in East Rutherford, New Jersey. IDA board member Lori Ann Pipczynski said at a special board meeting Dec. 21 the agency had obtained “several opinions” that “there is no legal conflict of interest with Nixon Peabody as transaction counsel, but chose to hire a new transaction counsel due community perception of a conflict, so that the review process could continue “without any perceived prejudice.”

Pipczynski did not reference either the RiverheadLOCAL article or the ongoing hand sanitizer lawsuit filed by Nixon Peabody against Triple Five Worldwide and certain Ghermezian family members.

Nixon Peabody brought a civil racketeering lawsuit against Triple Five Worldwide LLC, certain members of the Ghermezian family and others, on behalf of plaintiffs who say the company and individuals wrongfully used their “URBANE” sanitizer trademarked name and logo on counterfeit hand sanitizer produced in Mexico during the pandemic in 2020.

MORE COVERAGE: Federal lawsuit claims Triple Five company and Ghermezian family members sold counterfeit hand sanitizer in 2020

The lawsuit, filed in U.S. District Court for the Southern District of New York on Feb. 5, 2021, seeks to hold the Ghermezians personally liable for the plaintiffs’ losses as a result of the counterfeit hand sanitizer “scheme” undertaken in the name of Triple Five Worldwide LLC. The FDA put the counterfeit “Urbane” sanitizer on its “do not use” list for potential methanol contamination, according to the complaint, which caused irreparable damage to plaintiffs’ brand and business, according to the complaint.

Nixon Peabody’s lead attorney in the sanitizer lawsuit is partner David Schnapp, a trial attorney who specializes in copyright, trademark and other intellectual property litigation, according to the firm’s website.

Nixon Peabody’s complaint alleges that Triple Five Worldwide, a limited liability company formed in Nevada in 2000, as of 2020, had no tax records, no record of who owned the company or information about when ownership interests in the company were acquired.

The lawsuit initially named Triple Five Worldwide LLC, David Ghermezian and Yonah Ghermezian as defendants. Nixon Peabody is seeking to add Nader Ghermezian, chairman of the Canadian conglomerate Triple Five Group, and his nephews, Don Ghermezian, Triple Five Group CEO and Syd Ghermezian, Triple Five Group vice chairman, as defendants, as well as Community Federal Savings Bank, of which Syd Ghermezian is chairman and CEO.

Nixon Peabody’s motion for leave to file a second amended complaint came after discovery proceedings disclosed the involvement of additional family members in the “scheme” to market counterfeit hand sanitizer using the plaintiffs’ trademarked name and logo. The court has not yet ruled on whether to allow the second amended complaint.

The proposed amended complaint, filed last year, says the Ghermezians failed to follow basic corporate formalities in operating Triple Five Worldwide LLC, which it calls “a sham vehicle” — removing and adding company managers, using email accounts associated with other business entities and personal WhatsApp messaging accounts to conduct business. It alleges Triple Five Worldwide “failed to properly issue stock, hold meetings, and/or keep corporate records” and says the company lacks any accounting, financial review or audit policies, or other mechanisms for ensuring the accuracy and/or legitimacy of its financial records.

“From its inception in or about June 2000, Triple Five Worldwide has been a shell company, devoid of any actual assets and used only as one of numerous conduits through which the Ghermezian family, including Don Ghermezian, Syd Ghermezian, and Nader Ghermezian, ran various real estate operations,” the proposed amended complaint states. “Triple Five Worldwide is the alter ego of Don Ghermezian, Syd Ghermezian, and Nader Ghermezian,” the complaint states, asking the court to pierce the corporate veil and hold the individuals involved personally liable for the acts and obligations of the company.

Attorneys for Triple Five Worldwide and the Ghermezian defendants, deny the plaintiffs’ claims and oppose the plaintiffs’ motion to file their second amended complaint.

Two of the Ghermezian family members Nixon Peabody is seeking to add as defendants are involved in the Calverton land deal.

Triple Five Group Chairman Nader Ghermezian has been present at most of the proceedings involving CAT, including the town’s “qualified and eligible sponsor” hearings held prior to approving CAT for the purchase of town-owned land at the enterprise park in 2018. He testified during the qualified and eligible hearing, represented the company at a community meeting organized by the Riverhead Chamber of Commerce that year, and has addressed the Town Board at several meetings scheduled to discuss the company’s plans for the enterprise park site. He also attended the Riverhead IDA meeting at which CAT representatives presented their plans for the site to the IDA board.

Syd Ghermezian is a member of Triple Five Real Estate I, a limited liability company that owns 75% of CAT, with Luminati Aerospace owning the other 25%, according to a Jan. 17, 2018 letter from Nader Ghermezian to the Town of Riverhead.

Triple Five Real Estate I is wholly owned by Fundco International Limited, which is wholly owned by Global Investco Limited, which is wholly owned by Justin Ghermezian, according to CAT’s IDA application.

Justin Ghermezian has been present for many meetings with the Town Board but has rarely spoken. He did not testify at the company’s qualified and eligible hearing in 2018. Justin Ghermezian has not been named or referred to in the hand sanitizer lawsuit.

A spokesperson for Triple Five Group, following publication of RiverheadLOCAL’s Feb. 11, 2022 article about the hand sanitizer lawsuit, denied that the defendant Triple Five Worldwide LLC was related to the Triple Five Group whose affiliate CAT is doing business with the Town of Riverhead.

In a Feb. 15, 2022 email to Town Board members obtained by RiverheadLOCAL through a Freedom of Information Law request, Gary Lewi, a managing director of Rubenstein, a high-profile, Manhattan-based public relations firm, wrote:

“Triple Five Worldwide LLC, an entity named as a defendant in a recent lawsuit, has a name similar to Triple Five Group owned by the Ghermezian family.

“However the facts disclose that none of that company’s owners or managers, or that of a David Ghermezian named in the litigation, are members, owners, managers or directors of any Triple Five Group entities owned by the Ghermezian family. And in fact there are a number of David Ghermezians.”

In fact, copies of emails among Ghermezian family members involved in the hand sanitizer enterprise show emails sent to various Ghermezian family members, including David Ghermezian, Don Ghermezian and Syd Ghermezian, at triplefive.com email addresses, and emails to and from a senior vice president at West Edmonton Mall, the first mega-mall the family developed and still operates in Alberta, Canada.

“The confusion is immediate and understandable,” Lewi wrote in the Feb. 15 email to Riverhead Town Board members, but it needs to be stated in the strongest terms that the corporation named in this lawsuit is not in any way part of the Triple Five Group or our company’s multi-million dollar investment in the EPCAL site,” Lewi wrote in the email.