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A Bergen County judge has ordered a lawyer to testify about his role in an alleged attempt to mislead New Jersey regulators into allowing his clients to build on protected wetlands. Superior Court Judge Peter Doyne ruled that Joseph Basralian’s testimony could be compelled under the crime-fraud exception to the attorney-client privilege, finding the plaintiff had made out a prima facie case of fraud. The fraud accusation is part of a derivative shareholder’s suit, Laganella Property Management, LLC v. Hekemian , BER-C-414-06, filed last November. Basralian, of Hackensack’s Winne Banta Hetherington, Basralian & Kahn, was counsel to Jersey Investors Growth (JIG), a Hackensack-based real estate investment company; its management company, Hekemian & Co.; and Grandview Associates, a limited partnership with overlapping ownership. The plaintiff, Laganella Property Management, is a limited partner in JIG. JIG planned to build a large supermarket on property it owned in Sparta, known as Lot 48, and to construct a connector road between the town’s Main Street and Sussex County Route 517. The road could have been built across two contiguous parcels � Lot 12, also owned by JIG, and Lot 11, owned by Grandview Associates � but that would have interfered with JIG’s desire to build fast food restaurants on those parcels. JIG transferred title of Lots 11 and 12 to Basralian, allegedly to hide its ownership and to dupe the Department of Environmental Protection into allowing it to build the road on protected wetlands instead, Laganella asserts. In April 2005, Hekemian and Basralian executed an agreement that formed a new limited liability entity, 56 Main Street Associates, to hold title to Lots 11 and 12, with Basralian as the sole member. JIG, identified as the equitable owner, retained control. The agreement recited consideration of one dollar. A few days later, deeds were executed and Basralian signed two $425,000 promissory notes for the properties, one to JIG and the other to Grandview, payable within 30 days after demand. At an unspecified subsequent date, JIG filed a DEP application concerning Lot 48. Doyne did not have a copy of the application but wrote that it apparently “omitted any specific reference to Lot 11 or Lot 12.” Laganella alleges that the transfer and application under false pretenses exposed JIG to liability. Basralian is not representing any of the defendants in the suit, JIG general partners Robert Hekemian, Samuel Hekemian and Donald Barney. But as general counsel to JIG and Grandview, he invoked the attorney-client privilege at his Aug.17 deposition. He refused to answer questions about why the lots were transferred to the new entity, about the agreement creating the new entity, about whether Robert Hekemian was a partner of Grandview or about his correspondence with Robert about the agreement. He did answer some questions, based on information he says was obtained not as counsel but as a partner in a family partnership that owns a limited stake in JIG, Doyne noted. When Laganella moved to compel, the defendants cross-moved for a protective order. Laganella’s lawyer, Joseph Kreoll, argued two bases for piercing the privilege: the crime-fraud exception, applicable to “a communication in the course of legal services sought or obtained in the commission of a crime or fraud,” and the “at issue” exception, which deems the privilege waived when the opinion or advice of counsel is at issue. Basralian was used as “a straw man” to mislead the DEP, argued Kreoll, of Richard Malagiere’s Hackensack firm. Elliot Joffe, who represents JIG, Samuel Hekemian and Barney, contended there was no prima facie showing of fraud and no fraud committed. He relied on a separate omnibus application, filed in August 2006 by JIG concerning Lot 48, which appended the deeds to Lots 11 and 12, and a letter from the DEP to JIG’s environmental consultant that referred collectively to the three lots. Those two documents showed there was no intention to mislead, argued Joffe, of Hackensack’s Newman & Simpson. He said the “at issue” exception also did not apply because Basralian was not involved in the DEP application and the defendants were not relying on his opinion or advice. Doyne, in granting the motion to compel and denying the protective order, noted that New Jersey courts construe “fraud” broadly for purposes of the crime-fraud exception, set forth in N.J.S.A. 2A:84A-20(2)(a) and Evidence Rule 26. He found Laganella “comfortably carried its burden” to make a prima facie showing. “It certainly raises [a] question whether fraudulent activities occurred when a party purchased property for $425,000 yet forfeited substantive rights concerning the property for a consideration of a dollar,” he wrote. Further doubts were raised by the promissory notes, both of which named Grandview as the seller though one required payment to JIG. The other application and the DEP letter did not sway Doyne, who termed “less than compelling” the “contention [that] two negligible references in a separate, earlier and unrelated application evidence NJDEP’s actual notice and acknowledgment of JIG’s relation to Lot 11 and Lot 12.” Laganella’s theory, on the other hand, was “coherent, consistent and cogent.” Doyne also placed great weight on the defendants’ failure to explain the purpose of the April 2005 agreement and transfer or what interest it served to hold the lots in someone else’s name. “Defendants’ silence as to the reason and purpose of the transaction is resounding.” Doyne added that he did not need to decide whether the “at issue” exception applied. Basralian declines to explain the transfers of Lots 11 and 12, until he is deposed, which Doyne specified should occur within two weeks of his Oct. 26 ruling. “Should [the defendants] seek reconsideration, it would be inappropriate to say something that is violative of [attorney-client] privilege,” remarks Basralian. “If I’m deposed and required to answer, I will answer.” He says he has no interest in the outcome of the lawsuit, since he owns only a one-sixth share of his family’s minor stake in JIG. Kreoll and Joffe did not return a call seeking comment. Nor did Robert Ritter, of Hackensack’s Schiffman, Abraham Kaufman & Ritter, who represents Robert Hekemian and Hekemian & Co.

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