NIAGARA FALLS — It has been 10 years since a French man and a Hong Kong investor bought a nine-story glass office building on Rainbow Boulevard and announced an extraordinary plan to construct an underground aquarium on the site.

The proposal sank years ago, but the building can’t shake its connection to the failed AquaFalls project.

The property, on the border of Niagara Falls State Park, is now entangled in crossfire lawsuits in state and federal court.

One seeks to wrest control of the nine-story glass cube now known as One Niagara from manager Frank Parlato Jr.; the other asks a state judge to stop AquaFalls investor David Ho from interfering in the business.

Parlato and Ho are co-owners of the building, but their partnership, struck in late 2004 as the building faced foreclosure, has plunged into a bitter legal battle.

Developer Frank Parlato is having problems moving forward with the former Occidental building at 360 Rainbow Blvd. South in Niagara Falls. Charles Lewis/Buffalo

The federal lawsuit, filed by a Hong Kong company once represented by Ho, accuses Parlato of poorly managing the building and siphoning its profits away to himself and two other investors.

Parlato calls the allegations untrue and the suit a “nuisance.” He and the two other investors, Larry and Gordon Reger, contend Ho is simply trying to work his way back into control now that the building is showing signs of a turnaround.

“He’s trying to get back what he gave up,” said Larry Reger, who along with his son first invested in AquaFalls in 2000 and still retains a business interest in the building’s first and ninth floors.

Ho’s attorney, Steven M. Cohen, claims Parlato has shut Ho and his business agent, Shmuel Shmueli, out of the building’s operations and has denied them a full accounting of its revenue despite Ho’s part ownership of the property.

Parlato has “turned that building into his own private piggy bank,” Cohen said.

Parlato disputes that.

“As is my policy and is in the records that I’ve given to David Ho, all my money either goes toward taxes or is plowed back into the building,” Parlato said.

The suits are just the latest legal cloud to hang over One Niagara.

The building has been troubled since it became apparent that a 40-foot hole dug into the property would never become an underground aquarium.

It operates today in a gray zone of city approval.

Parlato has paid more than $440,000 in back taxes on the building during the last year, but property taxes still owed total $930,545.

The gaping hole, under Parlato’s direction, has been filled in and paved over, and the first floor now operates as a tourist center with souvenir stands, international food vendors and T-shirt sales.

The rest of the building remains condemned.

The city’s Planning Department revoked the building’s site plan approval last year, but the Inspections Department has allowed the first floor to remain open under a certificate of compliance issued in 2007.

Guy Bax, the city’s acting buildings commissioner, said he won’t revoke a building’s certificate for items like “landscaping and trees” as long as building codes are addressed.

“If the site plan falls out of compliance, this department is not in the business of revoking a certificate of compliance and putting them out of business,” Bax said. “It’s like using a bazooka when you need a fly swatter. I’m not going to take them out of business when I can use the fly swatter.”

Parlato has submitted new site plans for the building and said he is working to gain city approvals to open the ninth floor as an observation deck.

It has been slow, but steady progress, Parlato contends.

But Parlato’s partnership with Ho still overshadows the building.

At the heart of the state and federal lawsuits is an elaborate deal struck between Parlato and Ho in late 2004 when the building was on the brink of foreclosure.

By then, the “coming soon” signs touting an underground aquarium that lined a chain link fence around the hole had become a sad joke.

The AquaFalls project had soured, and the city was going after the building’s owners for structural problems related to the 40-foot excavation. The building’s only major tenant, the Small Business Administration, was preparing to move from its offices.

The Regers, who court papers show had invested $2 million in the project in 2000 through a company called Reger Investment Fund, were threatening to foreclose on a second mortgage they held on the building.

Documents filed with the court show Parlato struck an agreement with Ho in late 2004 in which the two would co-own the building with Parlato as the manager.

What Parlato agreed to provide in exchange for his co-ownership of the building is under dispute in a federal lawsuit filed by a Hong Kong-based company, Altissima Limited. The suit asks a federal judge to appoint a receiver to control the building.

Altissima Limited, which under Ho’s direction acquired the first mortgage on the building in October 2002, claims Parlato agreed to contribute an investment worth $4 million — a portion of which would pay for the mortgage the Regers held and the rest would go into developing the building.

But by a “series of fraudulent and sham transactions,” the lawsuit alleges, Altissima has lost control over its mortgage and the rents of the building without getting what it was due.

Not so, Parlato and his attorneys contend.

Neither the operating agreement between Ho and Parlato nor the agreement to transfer Altissima’s mortgage and the building’s rents include language about the $4 million. Parlato said it was considered in early negotiations, but was never made part of the final deal.

Instead, the operating agreement says Parlato’s company would acquire the mortgage held by the Regers that was headed to foreclosure.

That was done, said Parlato’s attorney, Paul Grenga, and Parlato has operated the building within the framework of the 2004 operating agreement.

Documents show Altissima collaterally assigned its mortgage and the building’s rents to One Niagara, the company owned by Ho and Parlato, in 2004. “Now that it’s out of foreclosure and being developed, they want to renege on that deal,” Grenga said of Ho and Altissima.

Who is behind Altissima is also in question.

David Ho signed the paperwork in 2004 on behalf of Altissima as a director, but the company’s attorney, Mitchell J. Banas Jr., said Patrick Ho, David’s brother, is chief executive and chairman.

“I do not understand David Ho to have any present association with Altissima,” Banas said.

But James Roscetti, who is representing Parlato in the federal suit, has argued that the Altissima suit is an attempt at “a second bite of the apple” to litigate issues at the center of a lawsuit filed by Parlato in 2007 in State Supreme Court against David Ho.

That suit asked a State Supreme Court judge to block Ho and Shmueli from acting as managers of the building after they held what Parlato described as an improper shareholders meeting to strip Parlato of control of the building.

By then, Parlato had reopened the first floor and was operating what appeared to be a thriving paid parking business in the front of the building.

The Regers had also been brought back into the building as investors and partners in another company, Tourist Services, which leases the first and ninth floors of the building. Tourist Services, in turn, operates the paid parking business and subleases space to local vendors on the first floor.

Tourist Services has paid for all of the renovations that have taken place to reopen the building, Parlato said.

“Mr. Parlato has spent 16 hours a day there making it work,” said Larry Reger, who lives in Florida.

State Supreme Court Judge Frank Caruso issued a preliminary injunction last May upholding Parlato’s right to operate the building as manager as the lawsuit progresses.

But the acrimonious relationship between Parlato and Ho has continued to simmer.

Caruso in February found Parlato in contempt of court and fined him $2,000 after a worker in the building refused to give Shmueli and an attorney access to the building.

Parlato has paid the fine.

Grenga said the company has made more than $40,000 worth of accounting work available for Ho and his representatives to view.

But Cohen, who represents Ho, said his client still needs more information about the business.

“There continues to be resistence to making any meaningful disclosure,” Cohen said. “Partners shouldn’t hide records from partners.”

Meanwhile, Parlato, who has reopened the first floor of the building this month for the tourist season, said the state lawsuit has been an expensive distraction to his effort to refurbish One Niagara.

“If it wasn’t for Ho’s grab, if he would have honored his agreement with me,” Parlato said, “the building would have been much farther along, and there would have been a lot more money paid down on taxes.”

djgee@buffnews.com

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