Empire State Building Splits Billionaire Dad From Jet-Set Daughter

In his most recent exercise in literary self-congratulation, Trump: The Art of the Comeback , Donald Trump goes on at great lengths about his most celebrated deals of the 1990’s. There are entire chapters devoted to the Trump International Hotel and Tower (“Four-Star Living”) and the renovation of 40 Wall Street (“Wall to Wall-Plush”). Strangely, though, the developer says hardly a word about the Empire State Building.

Maybe it’s because Mr. Trump’s much-publicized bid to control the world’s most famous skyscraper is looking less and less like something to brag about. Mr. Trump’s partners in the venture-Kiiko Nakahara, daughter of Japanese billionaire Hideki Yokoi, and her husband, financier Jean-Paul Renoir-are facing mounting legal troubles. What’s more, The Observer has learned the developer has yet to make any money from the building.

On Feb. 24, a Federal judge ordered Mr. Renoir’s extradition to France, where he has been charged with defrauding his father-in-law out of nine historic chateaux by transferring their ownership to a maze of offshore trusts that he and his wife control. Ms. Nakahara already has been detained in France by authorities investigating the unusual deals.

The French charges mirror accusations in a civil suit filed in Manhattan against the Renoirs, challenging their acquisition of the Empire State Building. In the lawsuit, Nihon Sangyo Company Ltd., a Japanese company controlled by Mr. Yokoi, claims to be the building’s rightful owner. The company accuses Ms. Nakahara and Mr. Renoir of engaging in similar tactics when they purchased the illustrious skyscraper for $42 million in 1993, a year before they entered into a partnership with Mr. Trump.

Indeed, Nihon Sangyo argues in court papers that the “misappropriation of the Empire State Building by the Renoirs is not an isolated incident, but is instead part of a worldwide fraudulent scheme … in which they misappropriated and looted nine chateaux in France, four castles in England, a valuable estate in Spain, Oheka Castle on Long Island and other assets rightfully belonging to” the company.

If the Renoirs are forced to give up the Empire State Building, Mr. Trump would presumably lose his toehold in the tower. The developer has long boasted that he got a 50 percent stake in the building when he struck his deal with the Renoirs. The Art of the Comeback features a picture of the Empire State Building with a caption reading: “I own this one, too.”

Yet the Renoirs themselves dispute this claim. According to one of their lawyers, Mr. Trump is little more than a manager. “On June 24, 1994, [Ms. Nakahara] and Mr. Renoir entered into an agreement with New York real estate developer Donald Trump to run the property,” Charles Ross, Mr. Renoir’s lawyer, argued in court papers filed in the extradition case. “Trump was to receive one-half of the increase in any profits that result from his management efforts. Press reports erroneously claimed that Trump had been given an ownership interest.”

Mr. Trump has yet to reap any profits because he hasn’t been able to break the 114-year lease on the building crafted in 1961 by the late Harry Helmsley and his longtime partner and financial guru, Lawrence Wein. The lease is now controlled by Leona Helmsley and real estate magnate Peter Malkin, Mr. Wein’s son-in-law.

Mr. Trump declined to discuss the Empire State Building. But a source familiar with his struggles said the developer is cautiously optimistic that he will be able to break the lease and finally make some money. If nothing else, the source said, Mr. Trump believes he can cut a deal with Mr. Yokoi to continue managing the tower if the Renoirs are sent packing. But an official close Mr. Yokoi’s company said the Japanese billionaire wasn’t interested in joining forces with Mr. Trump. “That’s highly unlikely,” the official said. “Right now, [Mr. Yokoi and Mr. Trump] are just litigants.” Attorneys for the Renoirs could not be reached for comment.

Needless to say, Mr. Trump’s attempts to control the Empire State Building are not turning out as he predicted they would when he joined forces with the Renoirs four years ago. In a press release announcing their joint venture, Mr. Trump proclaimed: “This is a great deal for me. I get 50 percent of all upside, and I don’t have to put a dime into the deal. I intend to make my position worth a fortune.”

In reality, Mr. Trump’s position was hardly worth anything. While the Renoirs could brag that they owned the Empire State Building, their trophy property was controlled by a partnership led by Ms. Helmsley and Mr. Malkin, which holds a master lease on the property that doesn’t expire until the year 2076. The building’s 800 tenants generate about $85 million a year in rent. But, under the master lease’s terms, Ms. Helmsley and Mr. Malkin pay a paltry $1.9 million a year to the skyscraper’s owners. Unless Mr. Trump somehow breaks the lease, his “upside” would be nonexistent.

If that weren’t bad enough, Mr. Yokoi went wild when he learned of the deal. In November 1994, Nihon Sangyo filed a lawsuit in State Supreme Court in Manhattan, claiming that the Empire State acquisition was a fraud and demanding $250 million in damages. According to the lawsuit, Ms. Nakahara was given about $40 million to purchase the skyscraper for his father’s company. Instead, the company says, she and her husband transferred the building to their offshore trusts.

Ms. Nakahara and Mr. Renoir have responded that Mr. Yokoi gave the Empire State Building to Ms. Nakahara, his favorite daughter, as a gift. Moreover, they accuse some of her brothers and sisters of instigating the lawsuit and the French criminal case out of jealousy. “If we are sitting at home and a sibling gets money from Dad to go buy the Empire State Building, we might be a little jealous,” Mr. Ross, Mr. Renoir’s lawyer, said at the recent extradition hearing. “I think certainly very jealous in this situation, jealous enough to bring this suit … It’s not a Yokoi-driven suit; it is a half-siblings-driven suit.”

Mr. Ross lamented in court papers that the French Government was quick to pillory Ms. Nakahara and Mr. Renoir because they already had alienated many of their neighbors, particularly those near Millemont, one of the allegedly purloined chateaux. “For centuries, before Ms. Nakahara purchased Millemont for [Nihon Sangyo], the land surrounding the chateau had been used as a private hunting ground by local gentry, organized into a hunting-and-shooting club called the White Cross,” he said. “Upon buying Millemont, Mr. Renoir informed the mayor … that hunting would no longer be permitted on the property. Mr. Renoir and Ms. Nakahara, already viewed as invaders, became pariahs.”

A Roach Motel?

While Ms. Nakahara and Mr. Renoir squared off with Mr. Yokoi and his contentious brood, Mr. Trump tried to extract some money from the Empire State Building. In February 1995, he sued Ms. Helmsley and Mr. Malkin, saying they had let the skyscraper deteriorate into a “roach-infested” commercial slum swarming with second-rate tenants. The suit was later dismissed. But by then, Mr. Trump and his partners had more pressing worries.

In January 1996, Ms. Nakahara was arrested in France after Nihon Sangyo informed authorities that she had transferred the ownership of the nine chateaux worth more than $20 million to the offshore trusts. According to a memorandum filed by the U.S. Attorney’s office in the extradition case, Mr. Renoir failed to respond to a French summons and fled the country. He was arrested last September in a condominium in the Galleria on East 57th Street, another property that Nihon Sangyo has accused Mr. Renoir and Ms. Nakahara of stealing from the company.

According to the memorandum, the couple used a “forged power of attorney” to put the castles under their ownership. “What the facts show is that Mr. Renoir committed fraud,” Assistant U.S. Attorney Timothy Coleman said at the Feb. 24 hearing where he argued for the financier’s extradition to France.

Mr. Ross, Mr. Renoir’s lawyer, contended that the couple transferred the chateaux and other properties to their trusts at Mr. Yokoi’s request to shield them from creditors in 1994 when he was having cash-flow problems. The billionaire was imprisoned in 1994 in connection with a 1982 fire at his New Japan Hotel that killed 33 people. He was released last year.

But Magistrate Douglas Eaton of Federal District Court in Manhattan didn’t buy it. He noted that the transfers took place in 1995 after Nihon Sangyo had sued the Renoirs for allegedly defrauding the company of the Empire State Building. “After November 1994, I think it is highly unlikely that Mr. Renoir believed that [Nihon Sangyo] was authorizing him or his wife to sell any of the chateaux or to transfer title in any manner,” the judge said at the hearing. “The November 1994 complaint made several things forcefully clear to Mr. Renoir. First, [Nihon Sangyo] and Mr. Yokoi completely mistrusted Nakahara and Renoir. Second, [Nihon Sangyo] and Mr. Yokoi were attempting to strip Nakahara and Renoir of their most valuable asset, the Empire State Building.”

Judge Easton ruled that there was “probable cause” that Mr. Renoir had committed forgery and embezzlement and ordered him extradited to France. Mr. Ross told The Observer that Mr. Renoir is contesting the order.

Not surprisingly, Stephen Rathkopf, an attorney for Nihon Sangyo, was heartened by the outcome of the extradition case. “If you follow what the allegations are and what the testimony has been in the action involving the Empire State Building, the recent results are consistent with our client’s position,” he said.

According to a source familiar with the case, Mr. Trump is betting that Ms. Nakahara and her father will resolve their differences or that he can strike some kind of a deal with Mr. Yokoi. And in the meantime, he is still trying to make some money at the Empire State Building. According to Richard Fischbein, his attorney, the developer continues to wrangle with Ms. Helmsley and Mr. Malkin in court, this time for allegedly failing to install a proper sprinkler system in the building.

Mr. Fischbein echoes his client’s longtime complaints that the skyscraper has become a dangerous building. “In the coming year, this is going to be one of the biggest real estate battles in the city,” Mr. Fischbein told The Observer . “I believe that Trump will prevail. Not only that, I believe Trump should prevail because that is a landmark building that must be preserved and obviously the only one who can preserve it is Donald.”

Mr. Malkin scoffed at the charges, saying that city agencies have ruled that the building is “in compliance with all the relevant codes.”

Either way, by pursuing his crusade to break the lease, Mr. Trump is keeping his foot in the door in case the Empire State Building changes ownership again.

Empire State Building Splits Billionaire Dad From Jet-Set Daughter