CHRISTOS J. DIKTAS*CHRISTINE GILLEN*

ROBERT A. SCHANDLER*

JULIO C. MOREJON

DENISE K. ZEV ALLOS

BRIAN P. JAKULEVICIUS*

MICHAEL L. KINGMAN

STEVEN A. COCHRANE

JON S. PLEVRITIS*OF COUNSEL

JAMES F. MADDEN (1921-2004)JAMES J. DEER (1930-1995)

DIKTAS SCHANDLER GILLEN MOREJON

AITORNEYS AT LAW

A PRQ."ESSIONAL CORPORATION

596 ANDERSON AVENUE

p.o. BOX 2199

CLIFFSIDE PARK, NEW JERSEY 07010

(201) 943-8020

TELECOPIER (201)943-8838

E-MAIL WRITERMLKESQ@AOL.COM

February 26, 2010

381 PARK AVENUE SOUTH

SUITE 701

NEW YORK, NEW YORK 10016

REPLY TO,

X NEW JERSEYNEW YORK

*MEMBERS OF NJ & NY BARS

Unit OwnersGalaxy Towers Condominium Association, Inc.7000 Blvd. EastGuttenberg, NJ 07093

Re: SUMMARY Of THE REPORT OF GTCA COUNSEL ON FIRESAfETY ISSUES CONCERNING THE GTCA AND THECONDUCT OF MANAGEMENT AND THE BOARD

Dear Unit owners:

This summary is intended to inform you of the results of a review of the factsand circumstances underlying the issuance of a Punitive Closing Order in connectionwith the GTCA parking garage in August of 2009, the events and actions whichpreceded that Order, the steps taken in connection with that Order, and other matterswhich came to the attention of Counsel during the review of over 1,000 pages ofdocuments. The original report was accompanied by an appendix consisting of 61exhibits totaling 240 pages of documents which form the factual basis for theconclusions reached in the report. B(2CaUSeof the privileged and confidential nature ofsome of those documents, and since there will in all likelihood be litigation as the resultof the findings of Counsel, the GTC!, Board of Directors has authorized a summary ofsome of the most critical findings be made available to unit owners.

INTRODUCTION

In January of 2009,the Guttel1berg Fire Code Official AI Salvesen, as part of hisofficial duties, commenced his annual reinspection of the fire safety systems at theGalaxy Towers, including the parking garage. All such systems are subject to annualand periodic inspection, and had been inspected and certified as having passedinspection through the end of 2008 except for the parking garage, which was certifiedthrough January 22, 2009. However, in September of 2008, it became apparent, atleast to the then GTCAFacilities Manager Andy Malonzo, that misinformation had beencommunicated to Salvesen by then General Manager Jan Van Bergen in Malonzo's

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absence due to illness. This information, an indication that Van Bergen was notproperly responsive to fire safety issues, was communicated to a number of membersof the Board of Directors, hereafter referred to as BOD. In the latter part of 2008, anumber of violations were identified by Salvesen and subsequently remedied, asreported to the BOD, on November 4, 2008, by Malonzo. There is no evidence that anexamination or review of the underlying fire safety issues resulted from the Malonzoreport.

When the annual fire safety inspections of the Galaxy Towers took placebeginning in January, a number of violations were alleged to exist, and official Noticesof Violations and Order to Correct were issued by Salvesen. On January 6, 2009, aNotice alleging 58 violations was served on Management; on January 9,2009, a Noticealleging 47 violations was served on Management; on January 13, 2009, a Notice ofImminent Hazard was issued; on January 14, 2009 a Notice alleging 21 violations wasserved on Management; and on January 21, 2009, a Notice alleging 84 violations wasserved on Management. It is at this point that a series of actions, and inaction, on thepart of Management resulted in problems which have still not been completelyresolved.

THE INITIAL MISCONDUCT Of r~ANAGEMENT

The first failure of Management occurred almost immediately upon the filing ofthe violation notices by Salvesen. Ey law, appeals of such notices must be filed withinfifteen (15) days. The notice concerning appeals is printed on the back of all violationnotices. However, Management, and specifically Van Bergen, took no action to requestthat appeals be filed in order to preserve the rights of the GTCA to challenge theviolations, or at least challenge the potential fines of $5,000.00 per day for eachviolation. This failure by Van Bergen was particularly inexplicable since, on February11,2009, Van Bergen directed then GTCA Counsel Buckalew to appeal violation noticesfrom Salvesen which were written on February 3, 2009, and an appeal of theseviolations was in fact filed. Van Bergen therefore knew of the need to file an appeal,as well as the fact that such appeals were time sensitive.

To compound this failure to take proper action in response to the violationnotices, Van Bergen did not inform the BOD of the violations. In fact, at the BODmeeting of February 5, 2009, during a lengthy report by Van Bergen, he made nomention of the pending violationsr despite the fact that Van Bergen did report onmeeting with the Fire Marshall (Salvesen) concerning an "emergency evacuation plan".Since Malonzo became ill and resi£Jned from his employment with the GTCA in earlyFebruary, and since neither Buckalew nor the BOD were informed of the Januaryviolation notices issued by Salvesen, no oversight existed to insure that Van Bergenand Management promptly addressed these critical issues.

At the next meeting of the BOD, on February 19, 2009, Van Bergen again failedto inform the BOD or unit owners of the pending violation notices or the need toproperly address them. Instead, Vein Bergen gave a report describing his first year asGeneral Manager in which no memion of fire safety issues was made. This omissionwas particularly glaring, since a reinspection the day before, February 18, 2009, by

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Salvesen had revealed that almost none of the January 6, 2009 violations had beenabated and reinspections were scheduled for the very next day, February 20, as wellas February 23, 2009. In fact, on February 20, 2009, at the direction of Salvesen, VanBergen was required to submit proof that the garage sprinkler system was operable,and did in fact submit a report from City Fire Equipment Co.{ Inc.{ a company whichhad been approved by the BOD{ which stated that although the garage sprinklersystem was operable it was in need of work.

It waSt in factI not until March 5, 2009 that Van Bergen and the new FacilitiesManager Danny Rivera (who had been hired by Cooper Square Realty{ the ManagingAgent and Van Bergen's employer{ unlike the previous Facilities Manager Malonzo whohad been hired by the BOD as a GTCAemployee) finally reported in detail to the BODon the pending violations. By this time, the opportunity for filing an appeal or takingany administrative or legal action in response to the violation notices to avoid theimposition of extensive fines and penalties had long since passed. It was at thismeeting that Van Bergen first openiy lied to the BOD in closed session by stating that75% of the violations had been corrected. In fact, as of March 5, 2009, out of 210violations{ 34{ or sixteen percent (16%) had been abated according to Salvesen. It isabundantly clear from the minutes of the March 5 meeting that not only was this thefirst time that the BOD had been made aware of these matters{ but Van Bergen alsopresented incomplete and inaccurate information to the BOD. Moreover, despiterequests from several Directors for additional information and records{ Van Bergen didnot provide copies to BOD members, and commented that he would do so later uponrequest.

Oddly and inappropriately, the former Board President not only supported VanBergen in this position, but suggested that it was incumbent upon the members of theBOD to request the copies. Aside from the obvious point that BOD members couldhardly ask in advance for documents they did not even know existed, such a positionwas inconsistent with the duty of the BOD to oversee the proper functioning ofManagement on such a critical life safety issue, especially when viewed in the light ofthe report of Malonzo several months earlier raising questions concerning Van Bergen'sresponsiveness to fire safety issues, Unfortunately { this posture by the President of theBOD left Van Bergen unsupervised and the BOD, and unit owners, ignorant of the truestate of affairs. Had the President a9gressively pursued this matter, in accordance withthe desires of members of the BOD, it is likely that action would have been taken farsooner to address the underlying issues and avoid the costs and disruption which lateroccurred. Van Bergen did subsequently make copies of the violation notices, at leastthose through February 2009, available to BOD members by March 7, 2009.

Additional Notices of Violation were issued by Salvesen on February 18, 2009,(which included an Order to Pay Penalty not disclosed by Van Bergen to the BOD onMarch 5){ and March 16, 2009. Both violations required BODattention and action; thefirst violation required the hiring of a company to make necessary repairs, and thesecond required the hiring of a qualified engineer for technical assistance. Theseviolations were especially critical, since the failure to comply with the requirements setforth led to the issuance of the garage Punitive Closing Order. Both violations couldalso have been easily presented to the BOD for action. The Managing Agent Cooper

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Square Realty, Inc. and their agent Van Bergen were obligated by their contract withthe GTCA, the law, and by the Administrative Resolutions which govern the GTCA,toseek bids from qualified engineers and companies to undertake the necessary work.In fact, such had been the routine, standard practice for many years at the Galaxy,and certainly, after a year as General Manager, Van Bergen would have been expectedto be aware of these requirements. However, Van Bergen failed to advise the BODofthe need to take such steps. The misrepresentations by Van Bergen and Riveracontinued in April of 2009. On April i', 2009, Van Bergen gave the false impression tothe BOD, and unit owners, that the qarage fire sprinkler system was being "handled"and corrected, and On April 23, 2009, Rivera reported to the BODand unit owners thatthe New Jersey and Guttenberg Fire Officials were "pleased" with GTCA progress. Ofcourse, as is now known, the exact opposite was true, and the involvement of the stateofficials actually represented an early indication that the level of frustration Salvesenwas experiencing from the failure of ~1anagementto address the ongoing problems wasescalating.

At least part of the reason for the failure to respond properly to the violationnotices may have been ignorance on the part of Van Bergen and Rivera, CooperSquare's newly retained Facilities Manager. On May 14, Rivera revealed that he had,acting on his own without BOD authority, discharged City Fire, the Board approvedcompany, and hired another company in its place. The discussion concerning this issueby the BODand Van Bergen and Rivera demonstrated a lack of awareness on the partof these two Cooper Square employees of their legal obligations under theManagement Agreement between Cooper Square and the GTCAas weli as under GTCAAdministrative Resolutions. It does not, however, explain why Van Bergen and Riveratook no action to cure the violations contained in the February 18 and March 16violation notices. It also does not explain the continued deceptions conveyed to theBOD. For example, on March 13,2009, Van Bergen submitted to the BODa report that90% of the 84 violations issued in January of 2009 had been "taken care of to thepleasure of the Guttenberg Fire Official". In fact, 210 violations had been issued inJanuary. There were 84 violations contained in the January 21, 2009 Notice ofViolations; however, as of the datE of Rivera's report, only 30, or 35% of those 84violations, not 90% as falsely claimed, had been abated. Also during March of 2009,the one Notice of Violation that had been appealed by Buckalew was represented byVan Bergen to be amenable to settlement by payment of a nominal fine instead of the$15,000.00 called for in the Order issued by Salvesen. Subsequent exchanges betweenCounsel and Van Bergen showed that no settlement with Salvesen had been reachedas had been falsely represented by Van Bergen.

ACTIONS BY THE BOARD OF DIRECTORS AND THE CONTINUING FAILURE OFMANAGEMENT

Independently of these fire safety issues, about which Counsel and the BODhadbeen either kept ignorant or had been provided with inaccurate information, severalissues arose which demonstrated serious problems of managerial incompetence as toVan Bergen's job performance in <3 variety of areas unrelated to fire safety. Thesematters were reported to the BOD which then engaged in a series of confidentialsessions over a period of several weeks, in which all Directors participated, which

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included a review of the performance of Van Bergen and the appropriate steps to betaken. Based upon a determination that the conduct of Van Bergen had exposed theGTCAto legal claims based upon his improper actions and evidence of mismanagementand incompetence! the BOD determined! by vote! to replace Van Bergen! and thatdetermination was conveyed to Cooper Square Realty, which began the process ofseeking a replacement in June of 2009.

Beginning in May of 2009, the BOD began to exercise more active oversightconcerning the actions of Management! based upon the evidence of misconduct andincompetence which had been reveeiled. Unfortunately, the BODwas not yet aware ofthe fact that Management had not been truthful and had kept the BOD fromdiscovering the truth about the nature and extent of fire safety issues still affecting theGalaxy. What was not revealed to the BOD! however, then or at any other time! wasthat Van Bergen, acting on his own without any legal authority to do so! executed onMay 1, 2009 a Request for Time ExtEmsionto remedy a large number of violations. TheRequest stated that work would be done by August of 2009; it named a companywhich had not yet been submitted to or approved by the BOD to do the work; and!most significantly, by completing the Request Van Bergen admitted that all of theviolations were factually and procedurally correct.

The seriousness of this unauthorized action by Van Bergen cannot beoverstated. In this single document, which he signed without the permission of theGTCABOD and Counsel, Van Bergen exposed the GTCAto hundreds of thousands ofdollars in fines by admitting the violations! while at the same time committing theGTCAto a course of action, and a time limit, for which he not only had no authority,but which had not so much as been discussed with Counselor the BOD. Although itwould have been logical and expected that Van Bergen would disclose the existenceof this agreement at the May 14, 2009 BOD meeting when he asked the BOD toapprove hiring the company he had already secretly committed to retain, the reasonhe failed to do so can be easily understood - there was no way that the BODcould beprovided with this information without Van Bergen admitting that the information hehad previously given the BODabout the violations having been 90% cured, and aboutthe "pleasure" of the Fire Marshall Salvesen, was in fact false.

On June 4 the BOD at its open session created a subcommittee for the purposeof working with Management and the town of Guttenberg on fire safety issues. Earlierthat evening, Rivera presented a proposal for a company to service the Galaxy firealarm system, which the BOD deemed incomplete, and Rivera was directed to supplyadditional information. The BODmet in a working session on June 10, 2009 to considerwhat company to retain, and selected a different company from that committed to byVan Bergen and hired by Rivera without authorization (since it was revealed that thecompany recommended by Van Bergen and Rivera was not in fact certified to performthe required work). On June 12, 2009, at 5:40 PM on Friday, Van Bergen sent an e­mail to Counsel advising that immediate approval of the contract was necessary tomeet a deadline imposed by the Fit-eMarshall. When an e-mail was sent questioningthe need for such immediate action, and pointing out that notice of a deadline had notbeen provided to the BODor Counsel, Van Bergen falsely responded that the BODhadbeen told of the deadline at its prior meeting (although that claim is not confirmed by

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the meeting minutes). Counsel responded to Van Bergenl and the BODI on June 161

2009, raising for the first time the question of whether in fact complete disclosure byVan Bergen of all outstanding violations and their status had been made known toCounsel and the BOD.

A formal demand was served on David Kuperberg, President of Cooper Square,in June demanding the replacement of Van Bergen. At the June 251 2009 BOD openmeetingl Rivera falsely reported to the BOD and unit owners that "his team wascomplying with the fire violations and the Guttenberg Fire Marshall is pleased thatthese long standing violations are being cleared up". In factI the truth was significantlydifferentl since the Fire Marshall, frustrated by the lack of progress, was only a fewweeks away from issuing Orders to Pay Penalty and Abate Violations for a failure toaddress the violations dating back to MarchI and a Punitive Closing Order for thegarage. However, the majority of the BOD was at this point unaware of the extent ofthe still unresolved violationsl and the extent of the deceptions which had left themmisinformed about these violations.

At the July 16, 2009 BOD open meeting Van Bergen announced that he wasbeing replaced as General Managerl and immediately left. Rivera provided the BODandunit owners with a facilities report which made no reference whatsoever to fire safetyissues, violations, or actions under 'Nay to address such issues. On August 11, 2009,Salvesen issued an Order to Pay Penalty and Abate Violations, which included adirective to close the parking garage unless a fire watch was instituted. The basis forthe Order was the failure to supply a Technical Assistance Report as to the sprinklersysteml which had been ordered on March 16, 2009. Ironically I this violation wasperhaps the simplest of all to curer since it only required the hiring of an expert toprepare a reportl something the BOD did on an emergency basis in early September,20091 once they became aware of the need to do so. The failure of Van Bergen, andlater Rivera, to act on this requirement and inform the BOD of the need to do so at ailover many months was a violation of their duties and obligations to the BOD and unitowners.

On August 20, 2009, Russell Jermyn, the new GTCAActing General Manageremployed by Cooper Squarel reported to the BODin executive session that there werea number of violations which included matters relating to the alarm panel and thegarage sprinkler system (Jermyn had fired Rivera shortly after assuming the positionof Acting General Manager). In open session, Jermyn confirmed that a fire watch wasin place, and that violations existed. By then, however, due to the time which hadalready lapsed, the fact that Van Bergen had failed to meet the August deadline he hadagreed to in writing without the permission of the GTCA BOD on May 11 2009, (andalso as the result of the actions of Director Barbara Tokay, discussed later in thisreport) Salvesen had conferred with state officials, and on September 2, 2009 heissued a Punitive Closing Order directing that the garage be closed until the violationsfound in February of 2009 were corrected, and for an additional 60 days thereafter.The Punitive Closing Order was immediately appealed and the garage remained open.The BOD also retained the services of a fire safety expert, Jerry Naylisl and the newGalaxy Managers, working with Naylisl Corporate Counsel, and most of the BODI beganthe process or developing and implementing a plan to remedy the violations. This led

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to the entry of a settlement Agreement with the State of New Jersey under which theGalaxy agreed to an expedited repair process to abate any outstanding violations.

On September 8, 2009, Salvesen also issued a series of Orders to Pay Penaltiesand Abate Violations, listing 102 violations of the 210 violations he had issued Noticesfor in January of 2009 as still outstanding and uncorrected. This was the first time theBOD knew the nature and extent of both the unresolved violations and themisinformation they had been provided. The Orders also made clear that, since almost50% of the violations alleged by Salvesen had never been corrected, both Van Bergenand Rivera had actively misled the BOD about the status of the violations and thecorrections. At a meeting with Counsel on September 1, 2009, a week before theOrders to Pay Penalties and the da'f before the Punitive Closing Order was issued,Jermyn delivered for the first time a copy of the entire file which Van Bergen hadmaintained on these matters to Counsel. The paucity of the file, and the lack ofreports, follow ups, or descriptions of action taken by Van Bergen unfortunatelydemonstrated the fact that Van Ber~}enhad failed to properly address the fire safetyissues. A report from Counsel was immediately issued to the BOD. The Orders to PayPenalties issued beginning September 8, 2009, totaled over $400,000.00, and understate law this amount would be automatically doubled since equal fines and penaltieswould have been payable to the stat,e, bringing the total of fines and penalties to over$800,000.00. Appeals of these Orders were promptly filed.

THE MISCONDUCT OF DIRECTOR, TOKAY

The September 1, 2009 report: to the BODfrom Counsel also related to the BODfor the first time the misconduct of Director Barbara Tokay in connection with thesematters. Director Tokay was a sitting member of the BODthroughout the entire timeperiod in issue. As a BOD member, Tokay, as is true of all Directors, owed a fiduciaryduty to the GTCAand its unit owners to act reasonably and in good faith in carryingout her duties. A Director is legally obligated to act within the confines of his or herposition, and to discuss with the BOD, and Counsel to the GTCA, issues affecting thegood and welfare of the organization and its unit owners. Directors are not permitted,under the law, to act as free agents and if wrongdoing is suspected, or discovered, bya Director, a Director is bound to properly report such wrongdoing to the Board andto Counsel. Director Tokay knew these facts and obiigations to be true; prior BODCounsel had issued at least one formal memo to the BOD in July of 2008 detailing theduties of a director and a seminar was conducted for the benefit of BOD members andunit owners in which these obligations were detailed by new Counsel in May of 2009 f

and Tokay as a Director had been provided with a DVD of the seminar. Tokay hadherself been admonished for violating these very duties in connection with an unfairlabor practice filed against the GTCAin which it was alleged Tokay had, as a Director,made improper comments concerning the union, when Tokay refused to meet with thelabor Counsel then representing the GTCA or with GTCA Counsel to discuss theallegations against her, which severely compromised the ability of the GTCAto defenditself against the charges. HOWeVef",notwithstanding her knowledge of her lawfulduties, Tokay violated these duties.

The proof of this exists in Tokay's own words, which she published regularly on

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a web site maintained by a Galaxy unit owner. What is clear is that, after obtainingcopies of the January 2009 violation notices on March 7, 2009, she enlisted the aid ofat least one other unit owner, who she publicly thanked, and began the process ofobtaining copies of other related government notices and records pursuant to NewJersey Law requiring the production of such records, at a cost of over $150.00 for a"lot of paperwork". While these records were being obtained, and after they had beenobtained, Tokay engaged in the active deception of the BOD by failing to alert them,or Counsel for the GTCA, to what she had uncovered. Instead, Tokay sought stateintervention in an effort to have sanctions imposed against the GTCA(and by extensionunit owners).

It was not the fact that Tokay obtained the records she did that constituted suchegregious misconduct on the part of Tokay. Rather, it was the use to which she putthese records. Had Tokay given copies of the records to the BOD and Counsel, andalerted them to the misconduct in which Van Bergen and Rivera had been engaged,so that the BODand Counsel could address such matters, Tokay would have deservedthe praise of the GTCAand its ownel"s. Instead, Tokay, aided by others, did exactly theopposite of what she was legally obligated to do. The evidence to this effect isoverwhel ming,

In June of 2009, Tokay publicly praised the creation of the Fire SafetyCommittee by the BOD and pledged to cooperate with it (although she was asked toserve on the committee and declined), and make information available to thecommittee members. However, instead of alerting this committee to what she hadlearned on her own as she had promised, only a few days later, Tokay publiclycriticized both the creation of the committee and its members personally. Tokay alsoadmitted to contacting, on her (Jwn, the State of New Jersey Department ofCommunity Affairs (DCA) to request that "fire safety regulations ...are enforced at theGalaxy", In that same statement Tokay admitted to advance notice of the issuance ofan imminent hazard notice, a precursor to the garage closing order. which knowledgecouid only have been gained from her private communications with state and localgovernment officials. Indeed, Tokay reported to members of the BODon the plannedissuance of the Punitive Closing Order the day before it was actually issued. Tokay alsoadmitted having obtained public necords, and having used that information not toreport the same to the BOD for proper action, but rather to "discuss a plan of actionfor dealing with the Galaxy's outstanding fire safety violations" with the stateenforcement agencies.

This last point is especially mportant, since Tokay acknowledged that, uponlearning the details of the extensive failure to correct the fire safety violations whichVan Bergen and Rivera had withheld from the rest of the BOD, instead of doing whatshe was legally required to do - bring this information and material to the attention ofthe BOD and Counsel - Tokay instead engaged in a direct attack against theorganization she was legally obligated to serve. By so doing, she violated her fiduciaryresponsibility and placed the well being of unit owners at risk. Instead of taking theproper steps of working with the BOD, Counsel and Management in an effort to seekthe abatement of the violations still outstanding, which was Tokay's legal duty as amember of the BOD, and which was also something certainly in the best interests of

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unit owners, Tokay instead sought the punishment of the GTCA through the closingof the garage and the imposition of fines which would, of course, have been borne bythe unit owners themselves. Such actions have nothing whatsoever to do with "freespeech", or "whistle-blowing", but rather constituted a flagrant breach of Tokay's legalobligations as a Director.

Further evidence of these facts, and the motives for them, can be found inTokay's public statement on August 20, 2009 that she had met with the town Mayorand asked that he "bring pressure to bear", while at the same time falsely claiming thatthe problem was being caused by the refusal of the BODPresident to pay a contractor.The depth of this lie is truly astounding. First, the President of the GTCAdoes not paybills, and in fact the delay in paying the contractor was due to the fact that the thenController had not been informed by IVlanagementthat payment was a priority. Second,Tokay knew, from the records she had obtained, that over a hundred violationsremained uncorrected, and that Van Bergen had secretly agreed to have all violationscorrected by August 1, 2009, and had failed to do so. The problem, therefore, wasknown to Tokay to be far more serious then she was claiming, and she also knew thatit had nothing to do with the BODwhich had been deceived. She has persisted in thesemisstatements, however, repeating the false claim that the fault lay with the Presidentand the BOD majority.

There are many other examples of Tokay's efforts to use the problems causedby Management in connection with the fire safety issue to attack members of the BOD,and advance her own political agenda, instead of seeking to have the underlyingproblems corrected. Indeed, Tokay published on October 1 a report from the NewJersey DCA which specifically stated that the underlying cause of the action takenagainst the Galaxy was the failure to address violations issued in January and February2009. In spite ofthis glaring evidencE that it was the failure of Management to addressand correct these violations, and despite the fact that Tokay knew, from her receipt ofthe public records, that Van Bergen and Rivera had repeatedly misled the BODin theirreports on the progress being made, Tokay persisted in the lie that the problems hadall been caused by the President and/or the BODmajority. Tokay even sought a secondgarage closing order when the implementation of the first such order was delayed bythe filing of an appeal, according to witnesses, and Tokay not only withheld publicrecords detailing the extent and nature of the violations from the BOD, but deliveredconfidential BOD information to others in an effort to obtain further penalties againstthe GTCA. Finally, when the extreme nature of the misconduct in which Tokay hadengaged became evident, and the BOD began its own investigation into the eventswhich led to the garage closing oreler, Tokay refused to cooperate with the BODinvestigation.

The publication by Tokay of photos of different parts of the garage sprinklersystem on a unit owner's web site, with claims of deficiencies and impending disaster,represent a further betrayal of her duties as a director. Tokay has absolutely notraining, experience, or qualifications in the area of fire safety. To take a photo andthen make false claims about the safety of residents in order to continue to blameJermyn and the BOD for Tokay's imagined problems conflicts with the duties of adirector, and is irresponsible and deceitful.

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FURTHER ACTIONS TAKEN BY THE BOD AND MANAGEMENT, AND THEWITHDRAWAL OF THE PUNITIVIE CLOSING ORDER

Fortunately, through the efforts of new Management, Fire Safety Expert JerryNaylis, and the BODmajority, correc:ive action was taken at considerable expense, theterms of the settlement order were complied with, and the Punitive Closing Order waswithdrawn. The fines imposed for the uncorrected violations were also reduced from$400,000.00 to $4,000.00 by Salvesen, when Management, Naylis, and most of theBODworking together, accomplished in three months what Van Bergen and Rivera hadfailed to accomplish in eight months.

Unfortunately, the intense focus on the garage sprinkler system has resulted inthe demand by the state and Salvesen that the Galaxy undertake a plan to replace theentire system. It is true, as even Tokay has conceded, that the system is over thirtyyears old, and replacement after so long is to be expected. It is also true that the firesafety codes now in effect were not in effect when the current system was installed.Compliance with the new code requirements, including, for example, the newlyrequired use of galvanized pipes, wlll be costly. It is also reasonable to suggest that,had the GTCA not been required to spend tens of thousands of dollars on anemergency basis simply to prevent the garage from being closed, which would havedisrupted the lives of hundreds of unit owners, that money would have been availabletowards the cost of a system replacement. Similarly, the legal and expert feesnecessitated by the litigation which nesultedfrom the issuance of complaints would alsohave been money better spent on a new sprinkler system. These costs were the directresult of the mismanagement by Van Bergen and Rivera, and the improper actions ofTokay.

It should be noted that there is no evidence that the garage sprinkler systemdoes not operate; in fact, the opposite is true. At worst, it has been reported aspossible that, due to age, the pitch of the pipes when originally installed, and a lack ofproper maintenance over many, many, years (during which years the system regularlypassed inspection) the system may have defects that could prevent it from fullyfunctioning. It is important to understand that this is speculation; it is an opinion basedon possibilities and conjecture, and it cannot be proven as true or false without actuallyoperating the entire system. Notwithstanding such conjecture and opinion, there issimply no proof that the system woutd not work as intended. However, the safety ofunit owners and residents are the most important priority of BOD members, and forthat reason the BOD has directed ~1anagementto prepare a multi-year plan for thereplacement of the sprinkler system.

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SUPPLEMENTAL SUMMARY OF REPORT ON THE ACTION OF MANAGEMENT INCONNECTION WITH THE MISCONDUCT OF DIRECTOR FRANCO LUNGO

During the course of the review of the events of the past year as described inthis summary, particularly with regard to the managerial misconduct of Van Bergen,it became clear that a number of separate incidents involving Director Franco Lungoand Van Bergen gave the appearance of collusion between the two to secure unfaireconomic advantages for Lungo, in violation of GTCAprocedures, Van Bergen's dutyto the GTCA, and Lungo's fiduciary duties as a BOD member. The first of theseincidents occurred in April of 2009, and became one of the reasons an examination ofthe overall conduct of Van Bergen vvas undertaken. The relationship between Lungoand Van Bergen, and the impropriethes engaged in by both individuals, are intertwinedwith the events of 2009 and are part of the overall sequence of mismanagement whichtook place.

On March 20, 2009, a few weeks after new GTCACorporate Counsel had beenretained by the BOD, directives were issued providing that, in the event a unit ownerclaimed that the GTCAwas responsible for any damages to that owner's unit, all suchclaims were to be submitted to the GTCAinsurance carriers, and form letters to thateffect were to be sent to the affected unit owner. Van Bergen, that same day, issuedsuch a letter to a unit owner. Thereafter, in early April of 2009, and again on April 15and April 18, Van Bergen requested that Counsel advise whether damages to unitdoors were the responsibility of unit owners or the GTCA.Van Bergen did not state thereason he was raising this issue. As a result, a memo to the BOD was prepared andsubmitted by Counsel advising that damages to unit doors were the responsibility ofunit owners. The fact that the GTCAinsurance carriers were responsible for handlingany claims made by unit owners for damages was also restated. Within days, it becameknown that the unit owner in question was in fact Director Franco Lungo, which VanBergen confirmed on April 27, 2009. Van Bergen, however, continued to seekpreferential treatment for Lungo by seeking payment for the damages to Lungo's door,arguing his case to the insurance brokers for the GTCA,something not done for otherowners.

The impropriety of the General Manager of the GTCAusing his position, and theservices of Corporate Counsel, for the benefit of a sitting Director, while at the sametime insisting that all other unit owners abide by the policies set forth only weeksearlierj is self-evident. Moreover, Lunge knew, when he received the April 21, 2009memo from Counsel that the substance of the memo was a confidential communicationconcerning the position of the GTCil,in connection with liability claims. Lungo's conflictof interest at that point was also self-evident. However, rather then admit to the BODand Counsel that this matter concerned him personally, and he should therefore notbe receiving such information (nor in fact should he have been benefitting from thespecial efforts of the General Manager), Lungo remained silent.

Further actions taken by Lungo and Van Bergen during this same time periodalso demonstrated what could reasonably be considered improper collusion betweenthe two to secure a financial benefit for Lungo at the expense of the GTCA and,therefore, from the unit owners Lungo was obligated to serve. In the latter part of

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2007, Lungo claimed that damage rlad occurred to his automobile while it was parkedin the Galaxy garage. Although Lungo claimed the damage was caused by GTCAworkers, there were no witnesses to confirm that claim. Lungo filed a claim with theGTCAand was advised, on February 13, 2008, by the then General Manager, that inaccordance with the Parking Garage Rulesand Regulations which he received when heobtained his parking decal, that the GTCA was not responsible for damages to hismotor vehicle while it was in the garage. This is the same policy applicable to everyperson who parks in the garage; it is a common policy for all parking garages; and itis an essential policy for the purpose of the GTCAinsurance policies.

Lungo, despite his knowledge of this policy and the fact that, as a Director, hewas duty bound to follow that policy, filed a lawsuit against the GTCAin March of 2009for the damages to his vehicle. This action followed a somewhat bizarre communicationfrom Van Bergen to Lungo, and the rest of the BOD, in August 2008 that Van Bergenwas confirming his "past and presenfc"discussions with Lungo concerning Lungo's claimfor motor vehicle damages, and that Van Bergen would report to Lungo personally onthe matter, even though a decision denying the claim had already been made andissued (albeit before Lungo had become a Director).The existence of the lawsuit byLungo was disclosed by Van Bergen to Counsel during a meeting with the insurancebrokers for the GTCAat a meeting at the Galaxy on April 22, 2009. Van Bergen failedto provide a copy of the summons and complaint to Counsel, failed to disclose that theclaim had been denied by the GTCA, and told the insurance brokers and Counselpresent at the meeting that the trial for damages to Lungo's car was scheduled for 2days later on April 24, 2009. Since the amount of the claim was approximately$1,000.00, less then the GTCAinsurance policy deductible, Van Bergen was advisedto appear in court on April 24, 2009 to see if the case could be settled for a nominalamount to avoid costs of Counsel, 0[- to seek an adjournment of the case so that newlyappointed Corporate Counsel could {)btain the file and review the facts. This confirmedwhat Van Bergen had been verbally told by the insurance broker for the GTCA,whenVan Bergen unsuccessfully sought to obtain payment from the GTCA carriers forLungo's claim after his predecessor had rejected the claim. Lungo has admitted to atleast one Director that Lungo had d~scussedwith Van Bergen the insurance carrier forthe GTCApaying him for the damages to his motor vehicle. It therefore appears thatboth Van Bergen and Lungo actively disregarded the established GTCApolicy againstpaying for damages to vehicles dclmaged while parked at the Galaxy garage, andattempted to obtain insurance payments for that claim.

Van Bergen in fact did not appear in court as advised or seek an adjournmentof the case, nor did he notify Counsel of his failure to appear. Lungo appeared, andsince no representative of the Galaxy was present, Lungo obtained a judgment bydefault against the GTCA, meaning that the legal merits of his case were not reviewedby the court. The conflict of interest, and self dealing, of a Director suing theorganization he supposedly serves, and obtaining a judgment against his fellow unitowners in a case where he knows that his claim is directly contrary to the policies ofthe organization, is obvious and overwhelming. Lungo, unlike a non-Director unitowner, had a fiduciary duty to respe,ctand enforce the policies of the GTCA.At the veryleast, as a Director, Lungo knew the GTCAshould have been represented in court, andhe should have contacted Van Bergen (unless he knew in advance Van Bergen would

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not be appearing), Corporate Counsel, or some other GTCA representative to makesure the rights of the GTCA were protected. Lungo failed completely to uphold hisfiduciary duties as a Director in this regard. Moreover, Lungo has refused to sign awarrant removing the judgment against the GTCA,and in fact has been in arrears onpayments which he owes as a unit owner, claiming that the amount of the judgmentshould be deducted from his assessments. Thus, even after Lungo became aware thathis actions had been improper, he continues to this day to refuse to honor his fiduciaryobligations as a Director. Directors, above all other unit owners, should not allowthemselves to be in arrears since doing so imposes costs on all other unit owners. Theevidence is compelling that Lungo sDught, and Van Bergen cooperated in, providingLungo with preferential treatment to which Lungo was not lawfully entitled, and furtherthat Lungo actively participated in attempting to secure a financial benefit to which heknew he was not entitled.

The GTCAis also currently being sued for over $6,000.00 by a company whichdid work on a unit owned by Lungo, Imperial Painting. The work in question wasperformed on November 14, 2008, and is described as sheet rocking, insulation, andpaintin9 services in one invoice fO[' $5,900.00, and mold remediation in a secondinvoice for $850.00. Van Bergen submitted an invoice to the Galaxy Controller onDecember 9, 2008, seeking payment to Imperial Painting for the services providedbased on the false statement contained in the request for payment that the claim hadbeen "submitted to insurance". In fact, a review of the claims submitted to the GTCAinsurance carrier includes no such claim. The services rendered by Imperial Paintingwere, according to Lungo in an e-mail sent on November 1'6, 2009, all related to moldremediation. Assuming this to be true, Lungo is obligated, pursuant to Resolution #04­11-105, Revised Mold Protocol, in effect since November 4, 2004, to pay the GTCAforthe costs of such remediation. Lungo has failed to do so, resulting in the pendinglawsuit. As stated previously, a Director is required to exercise the utmost commitmentto the organization he serves, and r'onor and respect the rules and regulations of thatorganization. By obtaining a benefit to which he was not entitled, and allowing otherunit owners to bear the costs Lungo himself should have paid, Lungo has violated hisfiduciary duties to the GTCA.Lungo permitted Van Bergen to seek to have unit owners,or their insurance carriers, pay for repairs to his unit when Lungo himself is responsiblefor those repairs. Lungo continues to permit unit owners to bear the legal expenses ofdefending a lawsuit for these costs, and refuses to accept his legal obligations.Collectively, the costs of these two matters are not great; the principles, however, arefundamental and dear, and were clearly violated by Lungo.

Despite several requests, Lungo refused to meet with GTCACounsel to reviewthese matters, and refused to makE:any records in his possession available to Counselfor examination. Such refusal is in itself incompatible with Lungo's fiduciary obligationsas a Director, although Lungo does legally retain his constitutional rights to remainsilent if he believes anything that he says could be used in a criminal prosecutionagainst him. It must also be noted that Lungo owns penthouses at the Galaxy whichapparently have been affected by roof leaks. Lungo was advised, and admitted, inSeptember of 2008 that he should not participate in discussions or decisionsconcerning roof leaks since he was personally affected by those leaks. Despite suchacknowledgment, however, Lungo not only voted, on October 2, 2008, on a contract

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between a roofing contractor and the GTCA, but he also participated in discussions atBOD meetings concerning roof leaks which affected him personally at other meetings,including on January 22, 2009, February 5, 2009, May 14, 2009 (when he again votedto enter into a contract with a roofin~~contractor on behalf of the GTCA), June 4,2009,July 16, 2009, August 20, 2009, and October 1, 2009. Taken as a whole, it appearsthat Director Lungo either does not understand the nature of a conflict of interest(despite having attended the seminar given for BOD members and unit owners in Mayof 2009 by Corporate Counsel which covered that topic), or he has chosen to ignoresuch limitations when his personal financial benefit is at stake. In either event, suchconduct is unacceptable in a Director of any organization. No Director has the right touse his office to gain special advantages, and no Director may ignore the legalconstraints imposed on the members of the organization he serves, as Lungo hasignored the parking regulations cind mold protocol requirements. Van Bergen'sassistance to and cooperation with Lungo's conduct is further evidence of themisconduct and mismanagement which Van Bergen repeatedly demonstrated, andwhich led to his dismissal over Lungo's opposition.

CONCLUSION

Following delivery of the complete report to the BOD, that body voted onFebruary 18, 2010 to direct the production and circulation of this summary to unitowners, as well as to Cooper Square and government representatives. The BOD alsovoted to initiate meetings with Cooper Square representatives, and governmentofficials, to address the issues raised by the report; directed Corporate Counsel toinitiate appropriate legal action; and established special committees to reviewmanagement procedures and to es\:ablisha long term fire safety plan.

The conclusions and opinions set forth in this summary are the result of a reviewof records and documents including but not limited to those contained in the appendixto the original report submitted by Counsel pursuant to the ethical obligations of anattorney to bring to the attention of its client conduct which is reasonably believed tobe improper, inappropriate, or adverse to the clients' interests in order that suchmatters may be addressed and corrected. The conclusions and opinions containedherein are based on the evidence made available, and it should be noted that thosepersons who either were not available or who refused to cooperate in the investigationwhich led to this report may be in possession of evidence which could alter some of theconclusions and opinions contained in this report.

Respectfully submitted

Dikta ilien Morejon PCCorporate CounselBy: Michael L. Kingman, Esq.

MLK/cr

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