This is the first chapter in a five-chapter story. Click here to see the rest of the series.
New York has long had a bumper crop of notorious landlords. Years back, there was the one dubbed the “Dracula landlord” because he kept returning to haunt tenants of his Brooklyn and Manhattan properties even after authorities thought they had laid him to rest.
Then there was the “devil landlord,” who seemingly delighted in keeping his Harlem residents in wretched conditions, at least until he was carted off to jail. These days, there are various lists of worst landlords and properties. There’s one published by the city’s public advocate, another compiled by the city’s housing department, as well as the original catalog of shame occasionally carried in The Village Voice.
But while his name or properties connected to him have graced all those lists, it’s hard to peg Frank Palazzolo, a wealthy Westchester real estate operator, as a member of the worst-landlord club. That’s because, even though the scores of buildings he was associated with teemed with violations and creaked in disrepair, actual legal ownership of most of the properties was usually in the hands of others. The question of who was responsible was forever murky. Lawyers, housing officials and tenant organizers always had a tough, if not impossible, time pinning down Palazzolo’s exact responsibility. What is clear is this: At one point, more than 100 large and, in many cases, severely troubled apartment houses in the Bronx were registered to corporations at his Scarsdale headquarters, according to city lawyers. The same buildings were wrapped in huge mortgages—worth tens of millions of dollars—that Palazzolo managed to obtain from major lenders. Strangely, those same buildings remained in squalid disarray long after those loans had closed.
In 2002 one of them was the scene of a fatal electrical fire. The blaze occurred 14 months after a Housing Court judge ordered numerous housing violations—including electrical hazards—fixed. An 8-year-old boy with a winning smile was killed; his brother was severely scarred.
Other buildings witnessed ceilings that collapsed atop tenants, drug gangs that roamed at will through their hallways, rodents that crawled out of the night to terrorize sleeping residents and potentially deadly lead paint that flaked off the walls and into the reach of infants. What was also clear was that Palazzolo brooked no criticism: When a veteran Bronx community group tried to organize tenants in buildings overseen by his associates, a million-dollar lawsuit was filed against them and an injunction was obtained barring them from the premises.
Nor was he glad to discuss his business. The few times Palazzolo was asked by reporters about his real estate practices, he ducked. When a WNBC camera crew managed to get into his Scarsdale headquarters, the real estate investor was captured on film waving off questions and walking away. “I own no buildings,” he said when a reporter for a Bronx newspaper managed to get him briefly on the phone. Then, like some faded movie star, he switched to the third person: “Palazzolo is a lender.”
If there were a tabloid tag for Frank Palazzolo it might be this: “The Phantom Landlord.”
Last fall, a class of students studying investigative reporting at CUNY’s Graduate School of Journalism undertook the task of trying to piece together the often fractured stories that have emerged over the years about Palazzolo’s real estate operation.
The investigation, and the story that emerged, is not only about one landlord’s record. It’s also about why banks lent vast fortunes to real estate managers with troubled records. What’s more, it aimed to understand why, despite the many laws and rules aimed at protecting vulnerable tenants, it’s still possible for buildings filled with needy families to lapse into disrepair while owners make huge profits.
Partial answers to these questions emerged from interviews with tenants, community leaders, bankers, landlords, investors and housing officials and a review of court documents and other public records.
For his part, Palazzolo declined repeated attempts to get his view of things. One of those attempts was in early November, when a pair of reporters working on the project drove up to Westchester to see if they could get an interview. Their first stop was at his headquarters on a commercial strip in the wealthy suburb of Scarsdale.
They pulled into the parking lot of the white, two-story office complex with the name Palazzolo Plaza emblazoned across the front. Westchester property records show that Palazzolo purchased the building in 1999 for $1.6 million. Parked outside the office was a gleaming silver Bentley, a brand of automobile long favored by tycoons and whose starting price is about $180,000. A worker was crouched beside it, busily polishing the rims. The vehicle’s New York license plate read “DEALMKR.” A records check showed it was registered to Palazzolo.
On the second floor, in the office of F&M Funding, one of Palazzolo’s many companies and listed as a lender on more than a dozen Bronx properties, they asked to speak to Mr. Palazzolo. He was busy, they were told, but a Mr. Tobia would be happy to speak with them. Stephen Tobia, a longtime associate of Palazzolo’s, emerged from the back to peer at them over his glasses as they explained their business. “It’s been a while with the Bronx properties,” said Tobia. “We’ll get back to you.” Tobia later called back to say Palazzolo declined an interview. Letters to Palazzolo’s home and office drew no response.
Palazzolo lives in an even tonier section of the county—leafy Bedford, 20 miles north of his offices—and the reporters went to take a look. Several years ago, a busload of tenants and Bronx community organizers protesting building conditions went up to demonstrate outside. The tenants gawked at the mansion, which sits behind a set of white pillars and gates, at the end of a wide driveway. Records show Palazzolo and his wife purchased the home in 1999, the same year as his headquarters. They paid $1.25 million. Its value is now listed at $2.3 million.
The reporters stood at the gate and looked down the drive. Five men were at work on the late-fall day cleaning the lawn with leaf blowers. It was a very big lawn, which was probably why it took five men to handle it. But as the results of our four-month long investigation into Palazzolo’s real estate empire suggest, the workforce on his front lawn that day looked a lot bigger than tenants we talked to saw dispatched to fix serious problems at scores of Palazzolo-linked apartment houses.