View Full Version : More problems for downtown Tulsa

08-16-2007, 07:58 AM
20 million lawsuit divides investors

By Steve Lackmeyer
Business Writer

When Maurice Kanbar and Henry Kaufman made a splash in Tulsa two years ago, it was Kanbar's money buying up 28 percent of the city's downtown real estate, while longtime friend and business associate Kaufman did all the talking.

After initially promising a coordinated development that would turn old offices into lofts, galleries and shops, the development has turned into a leasing operation that has been without Kaufman for the past six months. And while downtown Tulsans are wondering about the pair's break-up, a $20 million lawsuit by Kanbar against Kaufman reveals a bitter split with allegations of fraud and self-dealing.

The lawsuit, filed in San Francisco on April 17, alleges Kaufman "engaged in a campaign of lies and deception to conceal his conduct from Kanbar.”

"Kaufman did not simply make bad or highly speculative investments,” the lawsuit states. "He systematically abused the trust that plaintiffs had placed in him by failing to conduct rudimentary due diligence before investing plaintiffs' money; failing to advise plaintiffs as to the high risk and speculative nature of these investments; depleting plaintiffs' cash reserves and causing them to suffer a severe liquidity crisis; and as a result of the foregoing, causing plaintiffs to suffer tens of millions of dollars in damages.”

The lawsuit is by Maurice Kanbar and Kanbar Spirits Inc. against Henry Kaufman and up to 25 unidentified individuals.

Kaufman's attorney, Michelle Landry — citing the ongoing litigation — declined to comment on the case when contacted by The Oklahoman.

Kevin Dunne, representing Kaufman, said his client is bewildered by the lawsuit and they are awaiting a judge's decision on their request to move the lawsuit from the Superior Court of the State of California to U.S. District Court.

"Mr. Kaufman has helped Mr. Kanbar for many years,” Dunne said. "They've been very, very good friends, and they've worked projects that were very successful. Mr. Kaufman is at a loss to understand why this lifelong friend has turned against him.”

Old ties
Kanbar is described as "press shy” by acquaintances and employees. A search of the Nexis database of newspapers across the world show only a handful of interviews with the investor, and no public comments on his purchases in downtown Tulsa.
He made his fortune as the founder of Skky Vodka. A biography provided by the San Francisco mayor's office shows he also opened the first multiplex theater in New York and holds several inventor's patents. In San Francisco, Kanbar's name — and his money — is attached to numerous arts initiatives, scholarships and independent film productions.

But he was a virtual unknown in Oklahoma, until he and Kaufman began buying up some of downtown Tulsa's most prominent landmarks in August 2005. By the following year, Kanbar's purchases totaled more than $100 million. The 19 buildings accounted for about 28 percent of downtown Tulsa real estate.

In a January 2006 interview with The Oklahoman, Kaufman shared a vision for downtown Tulsa that was celebrated by local leaders looking to reverse years of decline.

Kaufman said he and Kanbar saw a chance to transform downtown Tulsa into the country's next big arts magnet. And their investments would reflect that hunch with a drive to lure some satellite university branches, museums and galleries to their buildings. They also were planning to convert some of their buildings into artists' lofts.

The pair appeared to be on track to begin that transformation with conversion of the Art Deco Transok Building, historically known as the Public Service of Oklahoma Building, into 52 lofts.

David Arnett, public information officer for Tulsa's Vision 2025 program and a longtime downtown resident and advocate, recalls the news conference at the Transok Building, with Kaufman in attendance, announcing the granting of Vision 2025 loans for four downtown housing projects. Loans awarded that day included up to $1.5 million for renovation of the Transok Building.

"When Kanbar and Kaufman said ‘I do' in Tulsa, that reassured Tulsans they could ‘do' as well,” Arnett said. "It was Henry (Kaufman) who was visible. He was someone who was gracious, positive and encouraging. You could tell he was a connector — someone who could connect people. Our hope for him was that he could be someone who could connect us with people who had never heard of Tulsa and would take a look.”

Kanbar continued to stay quiet about his Tulsa purchases, but Kaufman's words were widely regarded as coming straight from Kanbar. By Kanbar's own admission in court documents, the pair's friendship dates back to the early 1960s when both lived in New York, with Kaufman representing himself as an investment banker associated with Bear Stearns who owned seats at the New York Stock Exchange.

The lawsuit states Kanbar looked to Kaufman as both a "trusted confidant” and as a financial advisor, and that the millionaire chose to focus his time on his inventions rather than on the financial details of his investments. In 1984, Kanbar moved from New York to San Francisco, but continued to rely on Kaufman for advice. He invited Kaufman to move from New York to San Francisco to be his financial manager and oversee his investments, business endeavors and philanthropic activities.

The lawsuit states Kaufman made the move and was made a signatory on Kanbar's accounts. Over the following few years, news accounts showed the men together at various fundraisers, and they were both producers of 2006's animated movie "Hoodwinked.” Kaufman moved to Tulsa and opened an office to oversee Kanbar's growing real estate interests.

Kanbar's suit alleges Kaufman abused his trust by engaging in "self-dealing” with charitable trusts and violating federal tax laws, making inappropriate investments in real estate and oil and gas, paying "improper” and "unauthorized” finder's fees, commissions and other payments to third parties without Kanbar's consent, deceiving Kanbar about his investments, and concealing alleged wrongdoing.

Quiet split
Kaufman's departure as the public face for Kanbar's investments in Tulsa was announced in February and coincided with operations being assumed by Rachel Warren, chief operating officer of Kanbar Enterprises in San Francisco. At the time, Kanbar Properties said Kanbar would continue pursuing development of his properties but that progress might not be as fast as indicated by Kaufman.
Within weeks, Tulsa officials were notified Kanbar was no longer interested in the Vision 2025 money for the Transok Building. Don Himelfarb, director of economic development for Mayor Kathy Taylor, said the decision was "a timing issue.”

"We had a shortfall on the arena,” Himelfarb said. "The Vision 2025 money (for downtown housing) was going to be disbursed in a far more drawn out fashion, and they weren't prepared to start yet. They said if there were others ready to go, as a good corporate citizen they would let them use that money and they would come back later.”

The lawsuit came as news to both Himelfarb and Arnett.

Arnett said he was saddened by the realization that his city may lose out on a man who showed a passion for Tulsa's downtown. Arnett hosted Kaufman at his downtown Tulsa loft twice — once by invitation, another time when Kaufman asked to bring by friends to show an example of downtown living.

"To see Henry walking around downtown Tulsa because he loved to do that, and to know he could be living in New York City, San Francisco or Paris, and he lived here because he liked it — that gave me a great deal of joy,” Arnett said.

But Arnett admits such heartbreaks aren't new to Tulsans.

"Having been involved in Tulsa development and public policy for what seems like forever, and from my study of history, there's been a lot of flash money come and go in this town,” Arnett said. "At one time someone said they would build a fantastic amusement park at Turkey Mountain. Another man bought the Drillers baseball team, renamed Sutton Stadium and then was indicted. So all things can change — plans can evaporate.”

The Atlas Life building at 415 S Boston in Tulsa is one of the buildings purchased by San Francisco investor Maurice Kanbar. By John Clanton, THE OKLAHOMAN