Rep. Benjamin Rosenthal (D-N.Y.), accused the nation's largest condominium converter during a congressional hearing yesterday of "false advertising" for apartments at the Promenade in Bethesda.
During the third day of condominium hearings before his House subcommittee, Rosenthal waved the advertisements in the jammed hearing room and asked American Invsco Chairman Nicholas Gouletas whether the prices quoted included the cost of a special mortgage on the Promenade property that each buyer would share in paying off. Gouletas denied the accusation of false advertising, but said he was "not familiar with the ads" and would only be "guessing" at whether they included the special mortgage.
But earlier this week, another Invsco executive acknowledged that similar advertisements in The Washington Post failed to include the cost of the special underlying mortgage in the selling price.
According to the company's own documents on the Promenade conversion, that mortgage generally would raise the price of an apartment by about 28 percent. For instance, in one advertisement a "deluxe one-bedroom" cooperative apartment is pictured, noting that "prices start at $71,000." However, the figure does not include the cost to prospective buyers of the special underlying mortgage. It would increase the price of that type of apartment to at least $91,000.
Invsco executive James Keane said that the advertisements did not include the extra mortgage price because Invsco's property manager at the Promenade is from New York and "that's the custom in New York, and that's the way he's doing it here."
The conversion of the Promenade, twin 18-story towers near the Beltway, sparked one of the most ferocious tenant battles in the area and set off the congressional investigation by Rosenthal's House commerce, consumer and monetary affairs subcommittee.
Last November a subcommittee report found that the former chief tax assessor in Chicago, where Invsco (pronounced Invesco) is based, brought two suburban Maryland condominiums developed by the company under terms that allowed him to delay paying for the units until their value had increased by several thousand dollars. Chicago newspapers had reported that the office of former assessor Thomas Tully had granted favorable tax rulings to the firm on a suburban condo project while Tully was in office. t
Tully did not put up and "earnest money" deposits on the properties, although such deposits are the common practice in the real estate industry, until months after he signed contracts to buy them, according to subcommittee council Peter Barish.
At yesterday's hearings, Gouletas said he had "been waiting for six months to comment" on those allegations. He contended that Tully had received no special treatment, and that other buyers are sometimes allowed to contract for apartments without earnest money deposits.
Gouletas said that taxes on an Invsco property actually increased 60 percent while Tully was in office. However, Invsco protested at least one assessment increase, and taxes would have gone up even higher had the company not won. In 1978, Invsco protested a proposed assessment increase and it was adjusted downward, saving the company about $260,000 in taxes.
During yesterday's hearings, Gouletas revealed that Tully, who also owns several other of Invsco's luxury condominiums, received a $3,000 discount on one of the purchases in a Ft. Lauderdale building. Gouletas said Tully's contract was inadvertently placed in with those of building residents who were receiving similar discounts. "There was an error; nothing is perfect," he told reporters.