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

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February 26, 2010 Unit Owners Galaxy Towers Condominium Association, Inc. 7000 Blvd. East Guttenberg, NJ 07093
Re:

SUMMARY Of THE REPORT OF GTCA COUNSEL ON FIRE SAfETY ISSUES CONCERNING THE GTCA AND THE CONDUCT OF MANAGEMENT AND THE BOARD

Dear Unit owners: This summary is intended to inform you of the results of a review of the facts and circumstances underlying the issuance of a Punitive Closing Order in connection with the GTCA parking garage in August of 2009, the events and actions which preceded that Order, the steps taken in connection with that Order, and other matters which came to the attention of Counsel during the review of over 1,000 pages of documents. The original report was accompanied by an appendix consisting of 61 exhibits totaling 240 pages of documents which form the factual basis for the conclusions reached in the report. B(2CaUSe of the privileged and confidential nature of some of those documents, and since there will in all likelihood be litigation as the result of the findings of Counsel, the GTC!, Board of Directors has authorized a summary of some 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 his official duties, commenced his annual reinspection of the fire safety systems at the Galaxy Towers, including the parking garage. All such systems are subject to annual and periodic inspection, and had been inspected and certified as having passed inspection through the end of 2008 except for the parking garage, which was certified through January 22, 2009. However, in September of 2008, it became apparent, at least to the then GTCAFacilities Manager Andy Malonzo, that misinformation had been communicated 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 not properly responsive to fire safety issues, was communicated to a number of members of the Board of Directors, hereafter referred to as BOD. In the latter part of 2008, a number of violations were identified by Salvesen and subsequently remedied, as reported to the BOD, on November 4, 2008, by Malonzo. There is no evidence that an examination or review of the underlying fire safety issues resulted from the Malonzo report. When the annual fire safety inspections of the Galaxy Towers took place beginning in January, a number of violations were alleged to exist, and official Notices of Violations and Order to Correct were issued by Salvesen. On January 6, 2009, a Notice alleging 58 violations was served on Management; on January 9,2009, a Notice alleging 47 violations was served on Management; on January 13, 2009, a Notice of Imminent Hazard was issued; on January 14, 2009 a Notice alleging 21 violations was served on Management; and on January 21, 2009, a Notice alleging 84 violations was served on Management. It is at this point that a series of actions, and inaction, on the part of Management resulted in problems which have still not been completely resolved. THE INITIAL MISCONDUCT Of r~ANAGEMENT

The first failure of Management occurred almost immediately upon the filing of the violation notices by Salvesen. Ey law, appeals of such notices must be filed within fifteen (15) days. The notice concerning appeals is printed on the back of all violation notices. However, Management, and specifically Van Bergen, took no action to request that appeals be filed in order to preserve the rights of the GTCA to challenge the violations, or at least challenge the potential fines of $5,000.00 per day for each violation. This failure by Van Bergen was particularly inexplicable since, on February 11,2009, Van Bergen directed then GTCA Counsel Buckalew to appeal violation notices from Salvesen which were written on February 3, 2009, and an appeal of these violations 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 violation notices, Van Bergen did not inform the BOD of the violations. In fact, at the BOD meeting of February 5, 2009, during a lengthy report by Van Bergen, he made no mention of the pending violationsr despite the fact that Van Bergen did report on meeting with the Fire Marshall (Salvesen) concerning an "emergency evacuation plan". Since Malonzo became ill and resiJned from his employment with the GTCA in early February, and since neither Buckalew nor the BOD were informed of the January violation notices issued by Salvesen, no oversight existed to insure that Van Bergen and Management promptly addressed these critical issues. At the next meeting of the BOD, on February 19, 2009, Van Bergen again failed to inform the BOD or unit owners of the pending violation notices or the need to properly address them. Instead, Vein Bergen gave a report describing his first year as General Manager in which no memion of fire safety issues was made. This omission was particularly glaring, since a reinspection the day before, February 18, 2009, by Page 2 of 14

Salvesen had revealed that almost none of the January 6, 2009 violations had been abated and reinspections were scheduled for the very next day, February 20, as well as February 23, 2009. In fact, on February 20, 2009, at the direction of Salvesen, Van Bergen 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 which had been approved by the BOD{ which stated that although the garage sprinkler system was operable it was in need of work. It waSt in factI not until March 5, 2009 that Van Bergen and the new Facilities Manager Danny Rivera (who had been hired by Cooper Square Realty{ the Managing Agent and Van Bergen's employer{ unlike the previous Facilities Manager Malonzo who had been hired by the BOD as a GTCAemployee) finally reported in detail to the BOD on the pending violations. By this time, the opportunity for filing an appeal or taking any administrative or legal action in response to the violation notices to avoid the imposition of extensive fines and penalties had long since passed. It was at this meeting that Van Bergen first openiy lied to the BOD in closed session by stating that 75% of the violations had been corrected. In fact, as of March 5, 2009, out of 210 violations{ 34{ or sixteen percent (16%) had been abated according to Salvesen. It is abundantly clear from the minutes of the March 5 meeting that not only was this the first time that the BOD had been made aware of these matters{ but Van Bergen also presented incomplete and inaccurate information to the BOD. Moreover, despite requests from several Directors for additional information and records{ Van Bergen did not provide copies to BOD members, and commented that he would do so later upon request. Oddly and inappropriately, the former Board President not only supported Van Bergen in this position, but suggested that it was incumbent upon the members of the BOD to request the copies. Aside from the obvious point that BOD members could hardly ask in advance for documents they did not even know existed, such a position was inconsistent with the duty of the BOD to oversee the proper functioning of Management on such a critical life safety issue, especially when viewed in the light of the report of Malonzo several months earlier raising questions concerning Van Bergen's responsiveness to fire safety issues, Unfortunately { this posture by the President of the BOD left Van Bergen unsupervised and the BOD, and unit owners, ignorant of the true state of affairs. Had the President a9gressively pursued this matter, in accordance with the desires of members of the BOD, it is likely that action would have been taken far sooner to address the underlying issues and avoid the costs and disruption which later occurred. Van Bergen did subsequently make copies of the violation notices, at least those 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 on March 5){ and March 16, 2009. Both violations required BOD attention and action; the first violation required the hiring of a company to make necessary repairs, and the second required the hiring of a qualified engineer for technical assistance. These violations were especially critical, since the failure to comply with the requirements set forth led to the issuance of the garage Punitive Closing Order. Both violations could also 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 with the GTCA, the law, and by the Administrative Resolutions which govern the GTCA, to seek 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 expected to be aware of these requirements. However, Van Bergen failed to advise the BOD of the need to take such steps. The misrepresentations by Van Bergen and Rivera continued in April of 2009. On April i', 2009, Van Bergen gave the false impression to the 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 that the New Jersey and Guttenberg Fire Officials were "pleased" with GTCA progress. Of course, as is now known, the exact opposite was true, and the involvement of the state officials actually represented an early indication that the level of frustration Salvesen was experiencing from the failure of ~1anagementto address the ongoing problems was escalating. At least part of the reason for the failure to respond properly to the violation notices may have been ignorance on the part of Van Bergen and Rivera, Cooper Square'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 approved company, and hired another company in its place. The discussion concerning this issue by the BOD and Van Bergen and Rivera demonstrated a lack of awareness on the part of these two Cooper Square employees of their legal obligations under the Management Agreement between Cooper Square and the GTCAas weli as under GTCA Administrative Resolutions. It does not, however, explain why Van Bergen and Rivera took no action to cure the violations contained in the February 18 and March 16 violation notices. It also does not explain the continued deceptions conveyed to the BOD. For example, on March 13,2009, Van Bergen submitted to the BODa report that 90% of the 84 violations issued in January of 2009 had been "taken care of to the pleasure of the Guttenberg Fire Official". In fact, 210 violations had been issued in January. There were 84 violations contained in the January 21, 2009 Notice of Violations; however, as of the datE of Rivera's report, only 30, or 35% of those 84 violations, 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 by Van 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 between Counsel and Van Bergen showed that no settlement with Salvesen had been reached as had been falsely represented by Van Bergen.
ACTIONS BY THE BOARD OF DIRECTORS AND THE CONTINUING MANAGEMENT FAILURE OF

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

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included a review of the performance of Van Bergen and the appropriate steps to be taken. Based upon a determination that the conduct of Van Bergen had exposed the GTCAto legal claims based upon his improper actions and evidence of mismanagement and incompetence! the BOD determined! by vote! to replace Van Bergen! and that determination was conveyed to Cooper Square Realty, which began the process of seeking a replacement in June of 2009. Beginning in May of 2009, the BOD began to exercise more active oversight concerning the actions of Management! based upon the evidence of misconduct and incompetence which had been reveeiled. Unfortunately, the BOD was not yet aware of the fact that Management had not been truthful and had kept the BOD from discovering the truth about the nature and extent of fire safety issues still affecting the Galaxy. What was not revealed to the BOD! however, then or at any other time! was that Van Bergen, acting on his own without any legal authority to do so! executed on May 1, 2009 a Request for Time ExtEmsionto remedy a large number of violations. The Request stated that work would be done by August of 2009; it named a company which 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 the violations were factually and procedurally correct. The seriousness of this unauthorized action by Van Bergen cannot be overstated. In this single document, which he signed without the permission of the GTCA BOD and Counsel, Van Bergen exposed the GTCAto hundreds of thousands of dollars in fines by admitting the violations! while at the same time committing the GTCAto 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 it would have been logical and expected that Van Bergen would disclose the existence of this agreement at the May 14, 2009 BOD meeting when he asked the BOD to approve hiring the company he had already secretly committed to retain, the reason he failed to do so can be easily understood - there was no way that the BOD could be provided with this information without Van Bergen admitting that the information he had previously given the BOD about the violations having been 90% cured, and about the "pleasure" of the Fire Marshall Salvesen, was in fact false. On June 4 the BOD at its open session created a subcommittee for the purpose of working with Management and the town of Guttenberg on fire safety issues. Earlier that evening, Rivera presented a proposal for a company to service the Galaxy fire alarm system, which the BOD deemed incomplete, and Rivera was directed to supply additional information. The BOD met in a working session on June 10, 2009 to consider what company to retain, and selected a different company from that committed to by Van Bergen and hired by Rivera without authorization (since it was revealed that the company recommended by Van Bergen and Rivera was not in fact certified to perform the 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 to meet a deadline imposed by the Fit-eMarshall. When an e-mail was sent questioning the need for such immediate action, and pointing out that notice of a deadline had not been provided to the BODor Counsel, Van Bergen falsely responded that the BOD had been told of the deadline at its prior meeting (although that claim is not confirmed by Page 5 of 14

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 by Van Bergen of all outstanding violations and their status had been made known to Counsel 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 open meetingl Rivera falsely reported to the BOD and unit owners that "his team was complying with the fire violations and the Guttenberg Fire Marshall is pleased that these long standing violations are being cleared up". In factI the truth was significantly differentl since the Fire Marshall, frustrated by the lack of progress, was only a few weeks away from issuing Orders to Pay Penalty and Abate Violations for a failure to address the violations dating back to MarchI and a Punitive Closing Order for the garage. However, the majority of the BOD was at this point unaware of the extent of the still unresolved violationsl and the extent of the deceptions which had left them misinformed about these violations. At the July 16, 2009 BOD open meeting Van Bergen announced that he was being replaced as General Managerl and immediately left. Rivera provided the BODand unit owners with a facilities report which made no reference whatsoever to fire safety issues, 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 a directive to close the parking garage unless a fire watch was instituted. The basis for the Order was the failure to supply a Technical Assistance Report as to the sprinkler systeml which had been ordered on March 16, 2009. Ironically I this violation was perhaps the simplest of all to curer since it only required the hiring of an expert to prepare 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, and later Rivera, to act on this requirement and inform the BOD of the need to do so at ail over many months was a violation of their duties and obligations to the BOD and unit owners. On August 20, 2009, Russell Jermyn, the new GTCA Acting General Manager employed by Cooper Squarel reported to the BOD in executive session that there were a number of violations which included matters relating to the alarm panel and the garage sprinkler system (Jermyn had fired Rivera shortly after assuming the position of Acting General Manager). In open session, Jermyn confirmed that a fire watch was in place, and that violations existed. By then, however, due to the time which had already lapsed, the fact that Van Bergen had failed to meet the August deadline he had agreed to in writing without the permission of the GTCA BOD on May 11 2009, (and also as the result of the actions of Director Barbara Tokay, discussed later in this report) Salvesen had conferred with state officials, and on September 2, 2009 he issued a Punitive Closing Order directing that the garage be closed until the violations found 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 new Galaxy Managers, working with Naylisl Corporate Counsel, and most of the BODI began the 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 the Galaxy agreed to an expedited repair process to abate any outstanding violations. On September 8, 2009, Salvesen also issued a series of Orders to Pay Penalties and Abate Violations, listing 102 violations of the 210 violations he had issued Notices for in January of 2009 as still outstanding and uncorrected. This was the first time the BOD knew the nature and extent of both the unresolved violations and the misinformation they had been provided. The Orders also made clear that, since almost 50% of the violations alleged by Salvesen had never been corrected, both Van Bergen and Rivera had actively misled the BOD about the status of the violations and the corrections. At a meeting with Counsel on September 1, 2009, a week before the Orders 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 had maintained on these matters to Counsel. The paucity of the file, and the lack of reports, follow ups, or descriptions of action taken by Van Bergen unfortunately demonstrated the fact that Van Ber~}enhad failed to properly address the fire safety issues. A report from Counsel was immediately issued to the BOD. The Orders to Pay Penalties issued beginning September 8, 2009, totaled over $400,000.00, and under state law this amount would be automatically doubled since equal fines and penalties would 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 BOD for the first time the misconduct of Director Barbara Tokay in connection with these matters. Director Tokay was a sitting member of the BOD throughout the entire time period in issue. As a BOD member, Tokay, as is true of all Directors, owed a fiduciary duty to the GTCA and its unit owners to act reasonably and in good faith in carrying out her duties. A Director is legally obligated to act within the confines of his or her position, and to discuss with the BOD, and Counsel to the GTCA, issues affecting the good 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, by a Director, a Director is bound to properly report such wrongdoing to the Board and to Counsel. Director Tokay knew these facts and obiigations to be true; prior BOD Counsel had issued at least one formal memo to the BOD in July of 2008 detailing the duties of a director and a seminar was conducted for the benefit of BOD members and unit 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 had herself been admonished for violating these very duties in connection with an unfair labor 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 the labor Counsel then representing the GTCA or with GTCA Counsel to discuss the allegations against her, which severely compromised the ability of the GTCAto defend itself against the charges. HOWeVef", notwithstanding her knowledge of her lawful duties, 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 obtaining copies of the January 2009 violation notices on March 7, 2009, she enlisted the aid of at least one other unit owner, who she publicly thanked, and began the process of obtaining copies of other related government notices and records pursuant to New Jersey 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 been obtained, 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 state intervention in an effort to have sanctions imposed against the GTCA(and by extension unit owners). It was not the fact that Tokay obtained the records she did that constituted such egregious misconduct on the part of Tokay. Rather, it was the use to which she put these records. Had Tokay given copies of the records to the BOD and Counsel, and alerted them to the misconduct in which Van Bergen and Rivera had been engaged, so that the BOD and Counsel could address such matters, Tokay would have deserved the praise of the GTCAand its ownel"s. Instead, Tokay, aided by others, did exactly the opposite of what she was legally obligated to do. The evidence to this effect is overwhel ming, In June of 2009, Tokay publicly praised the creation of the Fire Safety Committee by the BOD and pledged to cooperate with it (although she was asked to serve on the committee and declined), and make information available to the committee members. However, instead of alerting this committee to what she had learned on her own as she had promised, only a few days later, Tokay publicly criticized both the creation of the committee and its members personally. Tokay also admitted to contacting, on her (Jwn, the State of New Jersey Department of Community Affairs (DCA) to request that "fire safety regulations ... are enforced at the Galaxy", In that same statement Tokay admitted to advance notice of the issuance of an imminent hazard notice, a precursor to the garage closing order. which knowledge couid only have been gained from her private communications with state and local government officials. Indeed, Tokay reported to members of the BOD on the planned issuance of the Punitive Closing Order the day before it was actually issued. Tokay also admitted having obtained public necords, and having used that information not to report the same to the BOD for proper action, but rather to "discuss a plan of action for dealing with the Galaxy's outstanding fire safety violations" with the state enforcement agencies. This last point is especially mportant, since Tokay acknowledged that, upon learning the details of the extensive failure to correct the fire safety violations which Van Bergen and Rivera had withheld from the rest of the BOD, instead of doing what she was legally required to do - bring this information and material to the attention of the BOD and Counsel - Tokay instead engaged in a direct attack against the organization she was legally obligated to serve. By so doing, she violated her fiduciary responsibility and placed the well being of unit owners at risk. Instead of taking the proper steps of working with the BOD, Counsel and Management in an effort to seek the abatement of the violations still outstanding, which was Tokay's legal duty as a member 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 closing of the garage and the imposition of fines which would, of course, have been borne by the unit owners themselves. Such actions have nothing whatsoever to do with "free speech", or "whistle-blowing", but rather constituted a flagrant breach of Tokay's legal obligations as a Director. Further evidence of these facts, and the motives for them, can be found in Tokay's public statement on August 20, 2009 that she had met with the town Mayor and asked that he "bring pressure to bear", while at the same time falsely claiming that the problem was being caused by the refusal of the BOD President to pay a contractor. The depth of this lie is truly astounding. First, the President of the GTCAdoes not pay bills, and in fact the delay in paying the contractor was due to the fact that the then Controller had not been informed by IVlanagementthat payment was a priority. Second, Tokay knew, from the records she had obtained, that over a hundred violations remained uncorrected, and that Van Bergen had secretly agreed to have all violations corrected by August 1, 2009, and had failed to do so. The problem, therefore, was known to Tokay to be far more serious then she was claiming, and she also knew that it had nothing to do with the BOD which had been deceived. She has persisted in these misstatements, however, repeating the false claim that the fault lay with the President and the BOD majority. There are many other examples of Tokay's efforts to use the problems caused by 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 underlying problems corrected. Indeed, Tokay published on October 1 a report from the New Jersey DCA which specifically stated that the underlying cause of the action taken against the Galaxy was the failure to address violations issued in January and February 2009. In spite ofthis glaring evidencE that it was the failure of Management to address and correct these violations, and despite the fact that Tokay knew, from her receipt of the public records, that Van Bergen and Rivera had repeatedly misled the BOD in their reports on the progress being made, Tokay persisted in the lie that the problems had all been caused by the President and/or the BOD majority. Tokay even sought a second garage closing order when the implementation of the first such order was delayed by the filing of an appeal, according to witnesses, and Tokay not only withheld public records detailing the extent and nature of the violations from the BOD, but delivered confidential BOD information to others in an effort to obtain further penalties against the GTCA. Finally, when the extreme nature of the misconduct in which Tokay had engaged became evident, and the BOD began its own investigation into the events which led to the garage closing oreler, Tokay refused to cooperate with the BOD investigation. The publication by Tokay of photos of different parts of the garage sprinkler system 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 no training, experience, or qualifications in the area of fire safety. To take a photo and then make false claims about the safety of residents in order to continue to blame Jermyn and the BOD for Tokay's imagined problems conflicts with the duties of a director, and is irresponsible and deceitful.
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FURTHER ACTIONS TAKEN BY THE BOD AND MANAGEMENT, AND THE WITHDRAWAL OF THE PUNITIVIE CLOSING ORDER Fortunately, through the efforts of new Management, Fire Safety Expert Jerry Naylis, and the BOD majority, correc:ive action was taken at considerable expense, the terms of the settlement order were complied with, and the Punitive Closing Order was withdrawn. 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 the BODworking together, accomplished in three months what Van Bergen and Rivera had failed to accomplish in eight months. Unfortunately, the intense focus on the garage sprinkler system has resulted in the demand by the state and Salvesen that the Galaxy undertake a plan to replace the entire system. It is true, as even Tokay has conceded, that the system is over thirty years old, and replacement after so long is to be expected. It is also true that the fire safety codes now in effect were not in effect when the current system was installed. Compliance with the new code requirements, including, for example, the newly required 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 an emergency basis simply to prevent the garage from being closed, which would have disrupted the lives of hundreds of unit owners, that money would have been available towards the cost of a system replacement. Similarly, the legal and expert fees necessitated by the litigation which nesultedfrom the issuance of complaints would also have been money better spent on a new sprinkler system. These costs were the direct result of the mismanagement by Van Bergen and Rivera, and the improper actions of Tokay. It should be noted that there is no evidence that the garage sprinkler system does not operate; in fact, the opposite is true. At worst, it has been reported as possible that, due to age, the pitch of the pipes when originally installed, and a lack of proper maintenance over many , many, years (during which years the system regularly passed inspection) the system may have defects that could prevent it from fully functioning. It is important to understand that this is speculation; it is an opinion based on possibilities and conjecture, and it cannot be proven as true or false without actually operating the entire system. Notwithstanding such conjecture and opinion, there is simply no proof that the system woutd not work as intended. However, the safety of unit owners and residents are the most important priority of BOD members, and for that reason the BOD has directed ~1anagementto prepare a multi-year plan for the replacement of the sprinkler system.

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

IN

During the course of the review of the events of the past year as described in this summary, particularly with regard to the managerial misconduct of Van Bergen, it became clear that a number of separate incidents involving Director Franco Lungo and Van Bergen gave the appearance of collusion between the two to secure unfair economic advantages for Lungo, in violation of GTCA procedures, Van Bergen's duty to the GTCA, and Lungo's fiduciary duties as a BOD member. The first of these incidents occurred in April of 2009, and became one of the reasons an examination of the overall conduct of Van Bergen vvas undertaken. The relationship between Lungo and Van Bergen, and the impropriethes engaged in by both individuals, are intertwined with the events of 2009 and are part of the overall sequence of mismanagement which took place. On March 20, 2009, a few weeks after new GTCACorporate Counsel had been retained by the BOD, directives were issued providing that, in the event a unit owner claimed that the GTCAwas responsible for any damages to that owner's unit, all such claims were to be submitted to the GTCAinsurance carriers, and form letters to that effect were to be sent to the affected unit owner. Van Bergen, that same day, issued such a letter to a unit owner. Thereafter, in early April of 2009, and again on April 15 and April 18, Van Bergen requested that Counsel advise whether damages to unit doors were the responsibility of unit owners or the GTCA.Van Bergen did not state the reason he was raising this issue. As a result, a memo to the BOD was prepared and submitted by Counsel advising that damages to unit doors were the responsibility of unit owners. The fact that the GTCA insurance carriers were responsible for handling any claims made by unit owners for damages was also restated. Within days, it became known that the unit owner in question was in fact Director Franco Lungo, which Van Bergen confirmed on April 27, 2009. Van Bergen, however, continued to seek preferential 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 other owners. The impropriety of the General Manager of the GTCAusing his position, and the services of Corporate Counsel, for the benefit of a sitting Director, while at the same time insisting that all other unit owners abide by the policies set forth only weeks earlierj is self-evident. Moreover, Lunge knew, when he received the April 21, 2009 memo from Counsel that the substance of the memo was a confidential communication concerning the position of the GTCil,in connection with liability claims. Lungo's conflict of interest at that point was also self-evident. However, rather then admit to the BOD and Counsel that this matter concerned him personally, and he should therefore not be receiving such information (nor in fact should he have been benefitting from the special efforts of the General Manager), Lungo remained silent. Further actions taken by Lungo and Van Bergen during this same time period also demonstrated what could reasonably be considered improper collusion between the 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 parked in the Galaxy garage. Although Lungo claimed the damage was caused by GTCA workers, there were no witnesses to confirm that claim. Lungo filed a claim with the GTCA and was advised, on February 13, 2008, by the then General Manager, that in accordance with the Parking Garage Rules and Regulations which he received when he obtained his parking decal, that the GTCA was not responsible for damages to his motor vehicle while it was in the garage. This is the same policy applicable to every person who parks in the garage; it is a common policy for all parking garages; and it is an essential policy for the purpose of the GTCA insurance policies. Lungo, despite his knowledge of this policy and the fact that, as a Director, he was duty bound to follow that policy, filed a lawsuit against the GTCAin March of 2009 for the damages to his vehicle. This action followed a somewhat bizarre communication from Van Bergen to Lungo, and the rest of the BOD, in August 2008 that Van Bergen was confirming his "past and presenfc"discussions with Lungo concerning Lungo's claim for motor vehicle damages, and that Van Bergen would report to Lungo personally on the matter, even though a decision denying the claim had already been made and issued (albeit before Lungo had become a Director).The existence of the lawsuit by Lungo was disclosed by Van Bergen to Counsel during a meeting with the insurance brokers for the GTCAat a meeting at the Galaxy on April 22, 2009. Van Bergen failed to provide a copy of the summons and complaint to Counsel, failed to disclose that the claim had been denied by the GTCA, and told the insurance brokers and Counsel present at the meeting that the trial for damages to Lungo's car was scheduled for 2 days later on April 24, 2009. Since the amount of the claim was approximately $1,000.00, less then the GTCA insurance policy deductible, Van Bergen was advised to appear in court on April 24, 2009 to see if the case could be settled for a nominal amount to avoid costs of Counsel, 0[- to seek an adjournment of the case so that newly appointed Corporate Counsel could {)btain the file and review the facts. This confirmed what Van Bergen had been verbally told by the insurance broker for the GTCA, when Van Bergen unsuccessfully sought to obtain payment from the GTCA carriers for Lungo's claim after his predecessor had rejected the claim. Lungo has admitted to at least one Director that Lungo had d~scussedwith Van Bergen the insurance carrier for the GTCA paying him for the damages to his motor vehicle. It therefore appears that both Van Bergen and Lungo actively disregarded the established GTCA policy against paying for damages to vehicles dclmaged while parked at the Galaxy garage, and attempted to obtain insurance payments for that claim. Van Bergen in fact did not appear in court as advised or seek an adjournment of the case, nor did he notify Counsel of his failure to appear. Lungo appeared, and since no representative of the Galaxy was present, Lungo obtained a judgment by default against the GTCA, meaning that the legal merits of his case were not reviewed by the court. The conflict of interest, and self dealing, of a Director suing the organization he supposedly serves, and obtaining a judgment against his fellow unit owners in a case where he knows that his claim is directly contrary to the policies of the organization, is obvious and overwhelming. Lungo, unlike a non-Director unit owner, had a fiduciary duty to respe,ctand enforce the policies of the GTCA.At the very least, as a Director, Lungo knew the GTCAshould have been represented in court, and he 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 make sure the rights of the GTCA were protected. Lungo failed completely to uphold his fiduciary duties as a Director in this regard. Moreover, Lungo has refused to sign a warrant removing the judgment against the GTCA, and in fact has been in arrears on payments which he owes as a unit owner, claiming that the amount of the judgment should be deducted from his assessments. Thus, even after Lungo became aware that his actions had been improper, he continues to this day to refuse to honor his fiduciary obligations as a Director. Directors, above all other unit owners, should not allow themselves to be in arrears since doing so imposes costs on all other unit owners. The evidence is compelling that Lungo sDught, and Van Bergen cooperated in, providing Lungo with preferential treatment to which Lungo was not lawfully entitled, and further that Lungo actively participated in attempting to secure a financial benefit to which he knew he was not entitled. The GTCAis also currently being sued for over $6,000.00 by a company which did work on a unit owned by Lungo, Imperial Painting. The work in question was performed on November 14, 2008, and is described as sheet rocking, insulation, and paintin9 services in one invoice fO[' $5,900.00, and mold remediation in a second invoice for $850.00. Van Bergen submitted an invoice to the Galaxy Controller on December 9, 2008, seeking payment to Imperial Painting for the services provided based on the false statement contained in the request for payment that the claim had been "submitted to insurance". In fact, a review of the claims submitted to the GTCA insurance carrier includes no such claim. The services rendered by Imperial Painting were, according to Lungo in an e-mail sent on November 1'6, 2009, all related to mold remediation. 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 GTCAfor the costs of such remediation. Lungo has failed to do so, resulting in the pending lawsuit. As stated previously, a Director is required to exercise the utmost commitment to the organization he serves, and r'onor and respect the rules and regulations of that organization. By obtaining a benefit to which he was not entitled, and allowing other unit owners to bear the costs Lungo himself should have paid, Lungo has violated his fiduciary 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 responsible for those repairs. Lungo continues to permit unit owners to bear the legal expenses of defending 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, are fundamental and dear, and were clearly violated by Lungo. Despite several requests, Lungo refused to meet with GTCACounsel to review these matters, and refused to makE:any records in his possession available to Counsel for examination. Such refusal is in itself incompatible with Lungo's fiduciary obligations as a Director, although Lungo does legally retain his constitutional rights to remain silent if he believes anything that he says could be used in a criminal prosecution against him. It must also be noted that Lungo owns penthouses at the Galaxy which apparently have been affected by roof leaks. Lungo was advised, and admitted, in September of 2008 that he should not participate in discussions or decisions concerning roof leaks since he was personally affected by those leaks. Despite such acknowledgment, however, Lungo not only voted, on October 2, 2008, on a contract Page 13 of 14

between a roofing contractor and the GTCA, but he also participated in discussions at BOD 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 voted to 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 appears that 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 May of 2009 by Corporate Counsel which covered that topic), or he has chosen to ignore such limitations when his personal financial benefit is at stake. In either event, such conduct is unacceptable in a Director of any organization. No Director has the right to use his office to gain special advantages, and no Director may ignore the legal constraints imposed on the members of the organization he serves, as Lungo has ignored the parking regulations cind mold protocol requirements. Van Bergen's assistance to and cooperation with Lungo's conduct is further evidence of the misconduct and mismanagement which Van Bergen repeatedly demonstrated, and which led to his dismissal over Lungo's opposition.
CONCLUSION

Following delivery of the complete report to the BOD, that body voted on February 18, 2010 to direct the production and circulation of this summary to unit owners, as well as to Cooper Square and government representatives. The BOD also voted to initiate meetings with Cooper Square representatives, and government officials, to address the issues raised by the report; directed Corporate Counsel to initiate appropriate legal action; and established special committees to review management procedures and to es\:ablish a long term fire safety plan. The conclusions and opinions set forth in this summary are the result of a review of records and documents including but not limited to those contained in the appendix to the original report submitted by Counsel pursuant to the ethical obligations of an attorney to bring to the attention of its client conduct which is reasonably believed to be improper, inappropriate, or adverse to the clients' interests in order that such matters may be addressed and corrected. The conclusions and opinions contained herein are based on the evidence made available, and it should be noted that those persons who either were not available or who refused to cooperate in the investigation which led to this report may be in possession of evidence which could alter some of the conclusions and opinions contained in this report. Respectfully submitted

Dikta ilien Morejon PC Corporate Counsel By: Michael L. Kingman, Esq. MLK/cr

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