An apparent power struggle over the One Niagara Building between co-owners Frank Parlato Jr. and David Ho carried over to State Supreme Court this past week and attracted accusations of tax evasion and embezzlement.

The legal battle was initiated after Ho’s company, Incredible Investment Limited, moved to begin an investigation into the accountings at One Niagara under Parlato’s watch. Parlato’s attorneys said Ho attempted to remove him as manager and replace him with Shumel Shmueli, a corporate troubleshooter who works with Ho in Hong Kong.

Supreme Court Justice Frank Caruso ruled last week Parlato’s operating agreement specifies he has “irrevocable rights” to serve as manager or to choose someone on his behalf, said Mike Powers, who represented Parlato in court.

“It was a bold and rather crude attempt to grab power,” Powers said about the actions of Ho’s company. “We got into court and stopped it before it went too far.”

The two sides were back in Caruso’s courtroom Thursday as the justice considered numerous requests made by Ho’s attorney Stephen Cohen to have Parlato hand over control of revenues and expenses for the building and countless documents relating to finances.

According to Powers, Caruso denied nearly all of the motions, but did reaffirm an agreement made last week that Parlato must hand over One Niagara’s books and records to Ho by Oct. 15 so an audit can be performed.

“That was something we had already agreed to and will comply with,” Powers said.

Cohen declined to give specifics of the court actions, but expressed appreciation that Caruso ordered the books and records be turned over for examining.

“We are looking forward to resolving our differences with Mr. Parlato and the judge’s intervention is a giant step in that direction,” Cohen said.

The court documents filed on behalf of Ho request the books and revenues be turned over immediately and allege Parlato is collecting thousands of dollars in revenue through a parking lot at the One Niagara site that is not being reported.

A private investigator was hired by Cohen to gather video surveillance outside One Niagara to determine the amount of money collected from the parking lot, according to the legal documents obtained Thursday by the Niagara Gazette. During the month of August, the investigator testified he observed at least $130,000 in cash change hands from “parking lot and interior operations.”

“... It is my belief that Frank Parlato is intentionally withholding books and accounting documents so that he can enjoy an inflow of cash that is not reflected on any bank statements or ledger sheets,” Cohen wrote in his court affidavit.

Cohen continued by stating, “In light of the observations of our investigators, it appears at least possible that Frank Parlato wishes to engage in embezzlement and tax evasion undisturbed. All we know for certain is that Mr. Parlato for over two years has not allowed us access to the documentation and data that we are absolutely entitled to.”

Powers declined to comment about any accusations made against Parlato, but said he’s confident once Ho’s company reviews One Niagara’s books, things can get “back to business.”

Ho’s company owned the former Occidental Chemical office building prior to Parlato and were behind the failed AquaFalls project. When Parlato took over in late 2004, Ho remained as an even 50/50 partner because he still held the mortgage on the property. However, Parlato held the operating power at the site as manager, according to the purchase agreement, Powers said.

The alliance erupted in August when Cohen sent a letter to Parlato informing him of an annual meeting of One Niagara LLC to “elect managers, review accountings from December 2004 to the present, and review current business and legal matters.”

Parlato was warned that failure to attend the meeting would “necessitate the bringing of an order to show cause to compel (his) attendance,” Cohen wrote.

Attorney Paul Grenga attended the Aug. 16 meeting on behalf of Parlato, and objected to the session.

“They were basically threatening to take over the project and they’re the ones who left the pit there in the first place,” said Powers, adding Ho’s company threatened to change the locks at One Niagara after the meeting.

Parlato declined to comment on the situation last month, saying it “didn’t land on his list of important things to deal with.” Instead, he focused on a recent $139,524 payment in back taxes he made to the city and the opening of One Niagara’s top floor to the public.