by Michael I. Niman
While Buffalo celebrated real estate developer Frank Parlato Jr.’s apparent metamorphose from ‘slumlord’ to ‘slumbuster,’ some community activists remained skeptical. Evidence now indicates that his three-month-old organization, Neighbors Incorporated, may just be a sophisticated slumlord seam.
Neighbors Incorporated, which was supposed to be bankrolled with a $90,000 personal (Parlato) equity line and a $600,000 line of credit Parlato claimed to have with M&T Bank, Key Bank, and Marine Midland Bank, set out to transform vacant east side properties into rehabilitated owner-occupied homes for low-income families. Neighbors Incorporated, Parlato argued, could use private funds and be free from the bureaucratic pitfalls and restrictions that publicly funded housing organizations face. Hence, the argument went, they could move quicker and be more effective. Revenue from home sales was supposed to roll over into new home rehab projects and, to sweeten the pie, Parlato, who describes himself as a “greenspace developer,” promised to use “half” of this money to plant trees and develop pocket parks in areas adjacent to the rehabbed houses.
In an effort to gain legitimacy for his plan, Parlato set out to recruit respected community leaders such as Broadway Fillmore Neighborhood Housing Service director Bob Sienkiewicz, block club organizer Bob Meldrum, public housing advocate Dick Kern, and block club leader Rev. Channell Garrett. Sienkiewicz, skeptical from the start, agreed to act in an advisory capacity but warned Parlato that he’d expose him at the first sign of wrongdoing. “Despite Parlato’s questionable reputation,” Sienkiewicz says, “the project had positive potential. It was clearly a good idea.” Sienkiewicz says he wanted to “Bet close enough to keep an eye on it while hoping for the best and preparing for the worst.”
Meldrum saw Parlato, a reformed ‘slumlord’ seeking to join the “slumbusters” in building a base of homeownership, as a positive role model f~or other slumlords. He didn’t want to dismiss Parlato out of hand and risk losing the program and Parlato’s $600,000+. to another community. “Everyone deserves a chance to come clean,” Meldrum said at the time. Like Sienkiewicz, Meldrum was skeptical. Never-the-less, he joined forces with Parlato to become both co-founder_and treasurer of Neighbors Incorporated, while at the same tim~ vowing to keep a watchful eye on Parlata’s dealings.
Shortly thereafter, Neighbors acquired their first property which they bought for $500, well below market value, from the federal insurance program, FREDDIE MAC. The rehabilitation of this house, a vacant two-family home located at 124 Ruhland Ave needing only minor repair, became Neighbors’ pilot project. Upon acquiring 124 Ruhland, Parlato quickly acted, doing what he does best. He created a public relations event by hiring 8 unemployed neighborhood residents to rehab the building and calling a press conference at the site, complete with free hot dogs.
The media spin was impressive. Within one month Parlato had a house in hand and began to make good on his promise to hire “several dozen” neighborhood residents. Eight workers, however, while looking impressive on television, proved too many to efficiently scrape a small house, especially without proper tools or training. Neighbors spent approximately $2,600 to scrape the house and then, after the media moved on, laid off most of the crew. In all, it Has a rather expensive media shot, to be paid off by the party·who eventually purchases the property.
Neighbors’crew was working, they were not covered by workmen’s compensation insurance, nor did Parlato make FICA contributions or deductions on their behalf.
After dismissing the neighborhood workers, Parlato hired his long-time associate, Ken Thomas, an unlicensed and uninsured contractor, to finish the exterior painting on Ruhland Ave. Again, Parlato moved without consulting Meldrum, his supposed treasurer, and paid Thomas $300 more than a local minority painter bid on the project.
LOANSHARK BORROWING
Meldrum, it turned out, was the treasurer in name only, having little success in wrestling either the checkbook or financial records from Parlato’s control. Parlato, without consulting anyone associated with Neighbors Inc., quietly financed the project at 124 Ruhland by borrowing in the name of Neighbor’s Inc., $6,000 from Sam Burruano, Buffalo’s former Director of Real Estate. Parlato agreed to pay Burruano 20X interest on the loan. Parlato then paid Burruano’s son, an attorney, $200 of Neighbors Inc. money to write up a mortgage on 124 Ruhland to back up his father’s loan.
When Meldrum learned of the loan arrangement, he quickly contacted other community activists associated with Nei~hbors Inc., who confronted Parlato. Parlato claimed 20%, which amounted to more than 7 times the going rate for a savings account, was a fair loan rate for a “risky” investment. Yet the investment was secured, at an additional expense to neighbors, through a mortgage. Parlato admitted that he didn’t borrow at the same high rates in his for-profit development business.
The additional cost created by private party loans at inflated rates would eventually add to the cost of the homes and be passed on to the low-income homebuyers who the program was purportedlY created to help. Hence, this was the first example of Neighbors Inc. serving to use money from low-income homebuyers to line investors’ pockets. The amount of money involved, if Parlato met his goal of processing 300-500 such houses, would be a windfall for Parlato’s lenders, who might feel inclined to pay the favor back in-kind.
When confronted, Parlato augmented Burruano’s$6,000 with $11,000 he claims was “borrowed” from his children’s colle8e fund. Embarrassed by the Burruano loan, Parlato dismissed his original idea of paying himself 10X and made his loan interest-free, for the time being. Meldrum, the supposed treasurer, was never consulted in any of these decisions or transactions. Absent from this scenario altogether was the legitimate bank financing Parlato initially claimed to have.
TREES, CARS, WHAT’S THE DIFFERENCE?
Shortly after sealing the deal with Burruano, Parlato made another deal in the name of Neighbors Inc., this time, buying and insuring a late model Oldsmobile Cutlass Sierra for his personal use. Moving ever further from his original goal, as stated to the Buffalo News(9/7/93), of using “half” of Neighbors’ money (proceeds) “for planting trees, developing gardens and creating access to beautiful things in the city,” Parlato had Neighbors outfit his car with a new $700 Pioneer stereo system. Parlato, “the Hindu-inspired housing advocate (Buffalo News who on September 19, 1993, told the Buffalo News, “My experiences as a penniless wanderer helped me develop a genuine love for people … Before that, I was more selfish,” neglected to inform anyone associated with Neighbors about his pressing need for high fidelity.
When questioned about the car, Parlato claimed it was a personal donation from him to Neighbors, yet it actually appears to be financed, in Neighbors’ name. Even as a donation, however, it would still be a seam, since it would allow Parlato to write his own personal car off his taxes as a “charitable donation.”
By late October, Parlato started getting bold, pressuring Meldrum to write a letter to Judge Sedita asking for leniency for Parlato’s friend; convicted Slumlord Norman Bakes who was facing sentencing for his crimes. Meldrum refused. One week later Parlato, a supposed·philanthropist who publicly stated he had nothing to gain from his association with Neighbors, suggested putting himself on the payroll as Executive Director, commencing in January. Meldrum, who was working full time as a Neighborhood Inc. volunteer became disgusted.
During the last week of October, Meldrum became suspicious about check 8122, which was missing from the Neighbors Inc. checkbook, and questioned Parlato. Parlato claimed to know nothing of check 8122, saying it must have been “misplaced.” When Meldrum called the bank, however, they reported it was cashed for $1,300. The $1,300 Neighbors Inc. check, drafted by Parlato, was cashed by Ren Thomas. On November 4th, Parlato told television news reporters that Meldrum signed check 8122 and that Meldrum in fact signed all the Neighbors checks. The paper trail, however, exposes Parlato’s allegation as a lie, since Meldrum’s name does not appear on the questionable checks.
Parlato, acting for Neighbors Inc., hired Thomas in mid-October to rehabilitate one of absentee landlord Russ Perla’s properties located at 141 Wende Street. Thomas, who still was unlicensed and uninsured, in turn, hired laid-off members of the Neighbors Inc. painting crew to work on the Perla house. Crew members, the only neighborhood residents to gain employment from the Neighbors project,·were being used to cut asbestos without being given proper cutting tools, respirators (masks), or other pieces of protective equipment required for asbestos work. Thomas had taken out no building permits, nor did he pay workman’s compensation or FICA.
According to Parlato, Neighbors was now moving into a new dimension of service: fixing up rundown absentee-owned properties and selling them to low-income homeowners. Russ Perla’s house at 141 Wende was to be the first. Once again, Parlato acted without consulting anyone associated with Neighbors Inc. The plan, according to Parlato, was to bring the houses up to “Neighbors Inc. standards,” and then peddle them for the landlords. Thomas’ crew on Wende, however, was preparing the house much as an unscrupulous used car dealer would prep a car for sale. The repairs were cosmetic, not structurally sound. He painted without using primer, painted over rotting wood, and put a new roof over two already decomposed roofs. The house, which was rehabbed up to Parlato’s standards, still had approxi~ately 35-40 housing code violations, including foundation problems, sagging floors, and a collapsing porch roof.
Thomas’ crews, working under Parlato’s direction and the Neighbors Inc. banner, began a similar rehab project at 122 St. Louis, which is owned by Michae? Lewin. Lewin was the target of the Broadway Fillmore Block Club Coalition’s first anti-slumlord picket. Parlato· has also recently announced that Neighbors Incorporated is entering into a pact with convicted slumlords Norman Bakes and John Rausner (both sent to jail for housing violations) to market their properties to low-income victims. Many of these properties are run down beyond repair, having been bled of all their worth through years of neglect.
THE ANTI-RACIST PARLATO
East Side block club members have repeatedly accused Parlato of involvement in blockbusting. Parlato, cognizant of these charges, is image-conscious. Like many suspected slumlords and blockbusting real estate agents, Parlato perpetually claimed to be an anti-racist while simultaneouslY being accused of profiting from exploiting black homebuyers and destabilizing the neighborhoods where they invested.
Parlato is still playing the race card. In an effort to defuse current criticism, he has insinuated that those who would question his actions, at this point a multi-racial group of community activists, might somehow be racist. Parlato continues to flank himself with African Americans, allegedly hired for photo opportunities, much as he hired a black crew to work on Ruhland Avenue during a television shoot. Yet he denies African Americans associated with his endeavors an autonomous voice. Parlato himself lives in a segregated white upper-middle-class neighborhood in Hamburg, New York.
The new “anti-racist” Parlato, like the old yuppie Parlato, profits from racial discord, both ‘coming and going.’ White flight, which has created what Parlato calls a “buyer’s market” in the inner city, has also increased the demand and hence the prices on economicallY homogeneous suburban subdivisions. Parlato Real Estate and its subsidiaries profit from buying inner-city houses at rock bottom prices and reselling them at a premium, while Parlato the developer cleans up on marketing suburban developments to the fleeing whites.
A forcer Parlato employee described how Parlato would make 200% to 300% profit on houses “he would buy in the morning and sell in the afternoon.” The employee explained how he was instructed to guide city inspectors around the properties, steering them away from uncorrected violations. Parlato’s repairs, he claimed, when they were made, were usually of the lowest quality and primarily cosmetic. These houses were then marketed to African American buyers through advertisements and articles in The Challenger and The Criterion. The most recent round of ‘Parlato on Parlato’ puff pieces, written as if penned by a third party, appeared in mid-November.
Parlato, strategically moving for high ground in the battle of racial rhetoric, organized a ‘dinner for a hundred people to combat racism through ~nter-racial dining and discussion. While possibly giving Parlato a sparkle in the media spin cycle, the dinner, held on the east side doesn’t address the serious problems of racism. A more apropos venue would be Parlato’s own backyard in the white burb of Hamburg, where racism abounds amid misconceptions and ignorance. Contrary to bourgeois fallacies, it is not the poor folks in the ghetto who are the driving force behind American Racism.
Parlato himself refused to consider naming streets in his new Hamburg subdivision after African American figures in American history. When this author challenged him to take such a simple, but brave step against racism, he simply and truthfully responded, “it would hurt sales.” Hence, it’s business as usual for Parlato as tributes to fallen African American historical figures are ghettoized in the inner city; the same place where Parlato wants to begin his war on racism.
THE CON-ARTIST PARLATO
The ‘dinner for a hundred’ is image crafting; damage control after the recent de-legitimization of Neighbors Inc. Those who have had dealings with Parlato agree he is a slick operator. His craft is manipulating those around him. His first step is often cerebral reconnaissance – trying to find out his subject’s desires or life goals. This takes the form of simple observations or outright questions such as: “where do you see yourself in five ·years or “What do you want out of life? Parlato then opens fire with a melange of promises: to help publish a book, get friends out of jail, fund an alternative monthly newspaper, find a dream house, create a job, etc.
The two most commonly used weapons in his arsenal are flattery, and when that fails, bribery. Flattery; being cheaper than bribery, is, of course, the first avenue of recourse. His attempts to silence this author, as an example, ranged from, “Mike, you’re a true genius,” to “Mike, I’d like to put you on the payroll as a consultant.” When these strategies fail, he resorts to threats, “I’m sure I can find dirt on you, on your friends.” Most recently, Parlato alluded that he would taint opponents with the stigma of “racism.”
Parlato, the con-man, has so far shown great success in managing the press. None of the allegations presented in this article, for instance, while commonly known and easily proven, have tarnished his ‘slumlord turned messiah’ media image. To listen to Parlato, reporters such as Jim Heaney of The Buffalo News, are like putty in his hands, with Parlato falsely claiming to pen their stories for them. A quick read of some of these stories, however, can only leave one wondering.
“NOT FOR PROFIT”
Despite Parlato’s’flurry of activity and sleazy deal-making, the original Neighbors Inc. Board of Directors never held an initial board meeting, elected officers, or adopted bu-laws. According to Parlato, the original 501(c)3 New York State-chartered not-for-profit corporation had only three board members: Parlato, Bob Pope (an employee of Parlato Realty), and Bob Meldrum. Had the board ever met, Meldrum~ the only community representative, would be outvoted by Parlato and his paid assistant Cin a recent Challenger article, Pope is described only as “a Buffalo housing counselor for 18 years”] The Advisory Board, which Parlato paraded before the press and in his literature, was a powerless body no longer involved in decision making.
They met a few times in August and early September than were written out of the picture as work on Ruhland got underway. Parlato explained to this author that meeting with them was an unproductive waste of his time. In Parlato’s words, “They Cwere3 difficult people to work with…there’s really no need to consult with them.”
By incorporating, and eventually controlling, his own not-for-profit corporation, Parlato is opening the way for all sorts of tax breaks. Parlato, for instance, has resisted allowing NeiBhbors Inc. to move to its own East Side office, despite the ample availability of low-cost space. Keeping Neighbors located in the Parlato Realty Building on Grant Street, however, opens the door to a host of tax write-offs for donated space and in-kind services. Telephone lines, office equipment costs, and even labor costs at the Grant Street office could be potentially written off as contributions to Neighbors. Equipment used by Parlato Realty, such as their TRW credit terminal, can be put into the name of Neighbors Inc. much the same way as Parlato’s car.
A SLUMLORD SCAM
For Parlato and the slumlord crowd, Neighbors Inc. is an ingenious seam. For starters, the free advertising and priceless public relations has paid off, with, according to Parlato, more than 700 houses being offered up for sale. Compliment this with more than 150 eager buyers (Buffalo News 10/3/93) and you have an active real estate business – so active in fact, that Parlato Real Estate cut back their conventional advertising.
Parlato can glean the best offerings for his for-profit parallel business, Parlato Realty. Parlato went as far as to suggest to Meldrum that Parlato Realty pick up the slack from Neighbors Inc., an idea Meldrum quickly shot down. Parlato, however, was still coveting properties offered to Neighbors. When one Lancaster-based east side landlord called Neighbors Inc. and offered to sell a solid house at a reasonable price, a representative from Parlato Real Estate called back to discuss buying it.
Neighbors Inc. in essence acts as a public relations agency for Buffalo’s most notorious slumlords, who by association with Neighbors appear to be reforming while in actuality they are just dumping worthless properties on unsuspecting buyers for inflated prices. Some of these slumlords could garner additional kudos for lending money to a struggling inner-city project while raking in obscene 20% interest payments.
Parlato has always had a strong selling point for prospective buyers: he arranges credit for those with shaky credit histories. He accomplishes this by paying off credit blocking judgments, then arranging two concurrent mortgages: one to pay off the house and another to pay himself off for paying off the previous debts. Under this plan, otherwise, unbankable individuals could buy houses, but only from Parlato, and now Neighbors Inc. Parlato’s advertisements traditionallY concentrated on monthly payments and not the total cost. Hence, homes can be sold at radically inflated prices with long-term mortgages knocking the monthly payments to a range that compares to rent. Low-income families who otherwise would not be in the housing market bite the bait. The mortgages, however, might outlast the houses.
All the while, under Parlato’s plan for Neighbors Inc., he’d be collecting a salary, driving a company car, enjoying generous tax breaks, arranging ~lucrative high interest secure short term investment opportunities for friends, and unloading problem properties for slumlords. At the same time, his rhetorical pandering to community interests will shield him from scrutiny and criticism. So far, the Buffalo News has referred to him as an “activist- developer, ” a “Hindu-inspired housing advocate,” an idealistic developer,” a “reflective man,” and ” the developer who would rather plant trees than build houses.”
Parlato describes himself as a “humanitarian.” Sienkiewicz and Meldrum describe him as a scam artist. Thanks to their vigilance, Parlato has been unmasked. Parlato claims he’s creating a “legacy for the next generation.” Let’s hope he’s not.