Big Bad Wilf: Did Zygi’s Stardust Take It All Too Far?

Judge cites real estate family for ‘fraud, bad faith, conspiracy, racketeering’

Epic Legal Defeat

The New Jersey trial Jarwick v. Wilf exposed some of the family’s worst business practices. Although the lawsuit involved just one of hundreds of Wilf building projects, the systematic skill of Zygi, Lenny and Mark in taking advantage of their partners cannot be dismissed as an aberration. The actions that outraged the trial judge were conducted with a business-as-usual attitude. The Wilfs screwed their partners because they could.

After canceling an interview, for which The Observer agreed to submit written questions and requests for comment, the Wilfs’ attorney sent a “Statement in the Matter Entitled Jarwick v. Wilf.” Although the statement is unresponsive in most respects, it does state the family’s position on the litigation and is printed in full on The Observer’s website.

Pullquote3The case arose from a 50-50 partnership that Harry and Joseph Wilf entered with brothers Abraham and Josef Halpern during the 1980s. The partnership would develop and build an apartment complex in Montville, later named Rachel Gardens, for Josef Halpern’s wife. (Abraham later conveyed his share to Jarwick Developments, a company started by their sister, Ada, and run by her husband, Ralph Reichmann.) The partners contributed money and property to the partnership and agreed on the responsibility to provide more if necessary.

When it became clear the Wilfs would get a $36 million construction loan and Rachel Gardens could be a bonanza, Zygi, according to the court, decided his partners “had gotten too good a deal. And so they were just simply not going to honor it.”

Two years later, after repeated efforts by the Halperns’ representative to find out what was happening, Zygi told him, “The train has left the station.”

After Jarwick Developments filed a lawsuit against the Wilfs, the family used its inside position to erase its tracks. They never provided their partners financial statements and moved financial records away from the building where the Halperns had an office. After months of testimony from accountants and financial experts and hundreds of exhibits, the court said, “I do not believe that I have seen one single financial statement that reflected the true and accurate position of the partnership.”

Under Zygi’s direction, the family also manipulated the partnership’s finances so it would appear never to be profitable. By burdening the partnership with excessive management fees, high-interest related-party loans and other expenses, the Halperns and Reichmanns would find themselves 50 percent owners of nothing.

The callousness of the Wilfs transformed a simple breach of contract into something more sinister: fraud, bad faith, conspiracy, racketeering and a case for punitive damages.

On Aug. 5, the court began issuing its findings of fact and conclusions of law. Judge Wilson expressed outrage at the defendants’ conduct. “In this particular case, the bad faith and evil motive were demonstrated by the testimony of Zygi Wilf himself.” The Wilfs’ bad faith and unfair dealing were “evidenced by [a] deliberate and irresponsible attitude that your partner with whom you have a contract is not entitled to the benefit of their bargain.”

In approving punitive damages, the court said the Wilfs acted with “a willful disregard of the rights of the partners, Jarwick and Joseph Halpern. And it was clearly not negligent. It was grossly willful. And it was done repeatedly.”

This is over-the-top language for a judge in a civil case, and it echoed from New Jersey all the way to Minnesota. Most stinging, perhaps, was the judge’s implication that Zygi, Lenny and Mark had wronged the honor of their fathers. Judge Wilson expressed great admiration for Harry and Joseph, saying, “Joseph was the body, and Harry was the soul of that enterprise, and they function together.” The court attributed to the first generation the best of intentions: “From everything that all of the witnesses and all of the family on both sides of this case have said about Harry Wilf, I have to believe that he had every intention of fulfilling his promise at the time it was made.”

Judge Wilson could not understand how Zygi could go back on the word of his uncle and father: “I wondered then and I wonder to this day how a nephew who so honored his father, Harry Wilf, could possibly renege on a deal that Harry had initiated. I don’t know why it happened. But these are words from the mouth of Zygmunt Wilf himself.”

Aug. 5 was the last day Zygi, Lenny and Mark appeared in court. On Sept. 23, they were absent when Judge Wilson said, emphatically, “The Wilfs didn’t just take a little extra money. They robbed their partners. … They took as much money as was there.” The court awarded the plaintiffs compensatory damages, prejudgment interest, RICO damages and punitive damages totaling $84,529,624. Plaintiffs’ attorneys also sought attorney fees and expenses, potentially bringing the Wilfs’ responsibility to more than $100 million. The court referred the issue of fees and expenses to a special master and should make its own ruling on the total, as well as enter its final judgment mid-December.

The family also has to deal with a criminal investigation stemming from the case. Because of the award of punitive damages, New Jersey Statute 2A:15-5.17 requires that “the court shall refer the record of that action to the prosecutor of the county in which the case was tried and to the attorney general for investigation as to whether a criminal act has been committed by the defendant.”

In July, as part of the consideration of punitive damages, Zygi, Lenny and Mark entered a stipulation in which each disclosed his net worth. They have since argued that the court should deny the public access to that part of the trial record. They claimed the disclosure of their net worth would “be an invasive encroachment on their private lives, potentially resulting in harassment of the Wilfs and their families, in some cases involving minor children.” They also said the net-worth figures would provide competitors and those doing business with the family “an advantage in their business dealings and negotiations.”

It was no surprise on Sept. 9 that the court rejected the Wilfs’ arguments and their request. (Because the defendants have asked the New Jersey Appellate Division to hear their appeal, the stipulation remains private for now.)

A generation ago, the family’s low profile was admirable. Under the leadership of Harry and Joseph, the family’s main display of affluence was its generous support of numerous charities. Even then, most of the publicity came from the recipients, not the Wilfs.

Such insistence on secrecy now seems ridiculous. Nobody is in the dark about the dynastic wealth of the Wilfs. They have been at the heart of the suburbanization of the Northeast for nearly 60 years. The lowball estimate of their wealth is $310 million. Clearly, no one in the family has used a shovel for other than ceremonial purposes for a long, long time.

Most important, if the sons of Harry and Joseph wanted to keep out of the spotlight, they should have known better than to join the world’s wealthiest club, the National Football League.

Big Bad Wilf: Did Zygi’s Stardust Take It All Too Far?