Lux Living failed to disclose SEC settlement, lawsuits in bid for Kansas City riverfront project
When a Port Authority of Kansas City committee meets Monday afternoon to discuss a major proposed apartment project at Berkley Riverfront, its members may have to consider whether the project’s developer was forthcoming in disclosures about its past.
Lux Living, a St. Louis developer, wants a 25-year tax break for a $55 million apartment project along the Missouri River in downtown Kansas City. Lux Living earlier this year answered several questions on an ethics disclosure provided by the Port Authority as part of an application for tax breaks. One section asked if its partners had ever been charged by a regulatory agency for violating financial or professional regulations.
The answer in the application was no.
Public records show Lux Living’s chief executive Victor Alston was sanctioned in 2017 by the Securities and Exchange Commission while he was in charge of Ixia, a network company based in California. The SEC found Alston broke accounting rules while he was chief executive of the publicly traded company, resulting in Ixia restating past financial statements.
The SEC banned Alston from serving as an officer or director for any publicly traded company for five years and ordered he pay a $100,000 fine. In settling the matter with the SEC, Alston did not admit or deny wrongdoing.
Alston resigned from Ixia in 2013 after an internal investigation found he misled the company about his academic and professional credentials.
After leaving Ixia, Alston got into the development business in St. Louis, focused largely on apartment and condo projects.
But his various development enterprises, including Lux Living and others, have attracted criticism from tenants and public officials. One top St. Louis official told the St. Louis Post-Dispatch that the city now requires a deeper evaluation of developers seeking incentives and the new criteria may prove difficult for Lux Living to meet.
And now Lux Living is working on four different development projects in Kansas City.
Alston did not respond to several requests for comment. His lawyer, Ira Berkowitz, said Alston’s sanction by the SEC did not merit disclosure to the Port Authority because he said the agency never “charged” his client.
Port KC has spent more than a year negotiating with Lux Living over a proposed 251-unit apartment project at the Berkley Riverfront.
An attorney for the Port Authority, or Port KC, acknowledged that it may have been wise for Alston to have disclosed the SEC matter “out of an abundance of caution,” but said the wording of the agency’s ethics disclosure at the time Lux Living completed it did not require it. The ethics disclosure form for the Port Authority has since been updated and the Port Authority said Alston would have had to disclose the SEC issue in the more recent version.
Joel Seligman, dean emeritus for the Washington University in St. Louis School of Law and expert in securities law, said Lux Living should have made Alston’s SEC matter known. He said a five-year ban is an indication of how seriously the SEC viewed Alston’s actions.
“That is something the commission only throws at the most serious of cases,” Seligman said.
‘Raises a lot of questions’
The ethics form also asked Lux Living or its partners or officers — or their business — have been involved in any litigation related to their business activities in the last five years.
Missouri court records show Alston’s businesses have been involved in at least three lawsuits in the last five years.
One example was a business entity controlled by Alston suing the St. Louis Development Corporation, requesting that a judge compel the agency to issue tax abatements for an apartment project called The Hudson. The case was later dropped.
Another ongoing suit revolves around the Expo at Forest Park development, a 285-unit apartment complex across the street from Lux Living's Hudson project and just a few blocks away from its apartment development dubbed The Chelsea.
In 2020, the Commercial DeBaliviere Place Association sued Pearl Capital Management, the developer of the Expo, claiming the development would create a parking issue in the neighborhood. Alston is the president and director of the association and voted to pursue legal action against the Expo's developer.
According to court records, Pearl Capital Management countersued the association over the lawsuit and has been attempting to depose Alston in the case for more than six months.
However, Berkowitz said the Expo lawsuit and Alston’s position on the DeBaliviere Place Association has nothing to do with Lux Living’s business and that competition didn’t play a factor in the filing of the suit. That’s why, he claimed, the lawsuit didn’t need to be disclosed to Port KC.
In addition, the Waterman-Pershing Condominium Association sued several business entities managed by Alston. The lawsuit, filed in August 2020 alleged that construction on The Chelsea apartment development in DeBalaviere Place caused damage to a nearby parking lot. The case was later dismissed.
Berkowitz acknowledged three lawsuits but called the matters “very minor.”
“Nothing that would concern anybody about anything — other than what happens when you’re a developer and end up in silly lawsuits."Ira Berkowitz, attorney for Victor Alston
Berkowitz said Alston wasn’t aware of the disclosure and didn’t review or sign it. He said Alston wasn’t sure who at his company sent the disclosure, which was a part of Lux Living’s development application to Port KC.
“I don’t think he even saw this thing filled out,” Berkowitz said.
A copy of Lux Living’s development application provided to the Midwest Newsroom was missing a required signature. Alston was listed as the only person authorized to sign the document.
Berkowitz said Lux Living doesn’t know who sent the document in and officials at Port KC said there was no record of who submitted the application.
“I don’t feel as though it was this major ethical breach on his part — if he did know about this and if he signed it,” Berkowitz said. “I don’t think he was trying to hide anything."
Asked about these apparent discrepancies in the ethics disclosure, Port Authority president and chief executive Jon Stephens instead lauded Lux Living for being “incredibly open, transparent, proactive in sharing information.”
He declined to comment on specific questions about Lux Living’s recent litigation history.
"We're continuing to move forward based on all the positives, but we're not naive to making sure we know the full picture and full story before we move forward," Stephens said.
Stephens said if there is a "clear ethical violation," Port KC's board will seek clarification on the issue.
Others voiced their concerns with Lux Living.
"The track record of the developer raises a lot of questions," said Bruce Eddy, who leads the Jackson County Community Mental Health Fund.
Eddy’s organization, which provides support for mental health agencies, relies on property tax revenue for its funding. Much like schools and libraries, the mental health fund can be affected when commercial developments like Lux Living’s proposal receive tax breaks.
Eddy criticized Port KC’s vetting of developers, citing a lack of transparency with the community.
“We need very clear rules and a predictable process and there’s a lot of mixed messages in terms of that,” Eddy said. “The community needs to be involved so its not just a checklist for developers but a process where everyone can engage.”
Designs on Kansas City
Alston and his brother Sidreth Chakraverty have attracted criticism for their development work St. Louis.
In 2016, an investigation by the Riverfront Times, a weekly newspaper in St. Louis, uncovered questionable practices by Asprient Properties, which was run by Alston and Chakraverty. Asprient now goes by the name STL Citywide.
Earlier this year, an article in the St. Louis Post-Dispatch chronicled complaints by residents of The Hudson, a Lux Living development, who signed leases and found themselves occupying unfinished apartments.
In March, a 16-year-old was shot to death in a downtown St. Louis building where a party was being held at a short-term AirBnB rental. Aconcagua One, a business entity managed by Alston, owns nearly half of the condos in the Ely Walker Lofts, where the shooting took place.
Berkowitz denied to the Post-Dispatch that Alston was running short-term rentals in the building and that the shooting was the result of the St. Louis “crime problem.”
Lux Living has set its sights on Kansas City. The development firm bought the former Katz Drugstore building at Main Street and Westport Road from Redeemer Fellowship Church earlier this year and plans to convert the iconic structure into luxury apartments. Lux Living is also pursuing another apartment project in Kansas City’s Freight House District.
Before becoming a prolific developer in St. Louis, Alston worked from 2004 to 2013 at Ixia, a California company that sells network testing products. He joined the company as a senior vice president and in 2012 was appointed chief executive officer.
Ixia’s audit committee investigated Alston and discovered that while he had attended Stanford University, he incorrectly claimed to have earned bachelor’s and master’s degrees in computer science. He also misstated his age and early employment history, according to an SEC filing.
The investigation resulted in Alston’s resignation both as an executive and board member of Ixia on Oct. 24, 2013.
An SEC investigation into Alston’s time at Ixia found he ordered changes to the company’s accounting practices that regulators said ran afoul of internal controls and bookkeeping standards. Specifically, the SEC said Ixia, at Alston’s direction, split purchase orders in an effort to accelerate when certain revenues from the company’s business were recognized.
Ixia and Alston settled the SEC administrative proceedings, with neither admitting to denying the allegations. The SEC ordered Ixia to pay a $750,000 fine and also ordered Alston to pay $100,000.
‘It’s a very long abatement’
At a March meeting of Port Authority, Kansas City Public School senior policy strategist Kathleen Pointer said the district doesn't support the proposed 25-year tax exemption on the project.
"The school district is being asked to forego full potential revenue for more than two decades and it's not adding a significant number of truly affordable units," Pointer said.
Kansas City Public Library finance director Janice Bolin echoed Pointer's concerns at the meeting.
Alston’s proposal would fulfill Kansas City’s new affordable housing ordinance that requires multifamily projects that receive incentives to lease 20% of its units at rent rates that meet the city’s definition of affordable housing.
"We are very happy to see the affordable housing but the library has the same reservations the school district has," Bolin said. "It's a very long abatement."
Berkowitz said schools and other groups that receive property tax revenue will “always” criticize tax exemptions. He said without assistance, developers like Lux Living won’t build affordable housing.
“It takes tax abatement to get these guys to do these sorts of things,” Berkowitz said. “Before this project there was no tax revenue from this land, there was no value to it.”
Eddy said he hopes Lux Living’s project is successful. While he’s unhappy with Lux’s past endeavors, he’s glad to see a Kansas City project plan to meet the set-aside requirements.
"We're not against tax abatement and we're not against development," Eddy said. "But when we lose revenue to these projects we think that the community should benefit. We think it ought to be equitable.”
The Port Authority is set to discuss Lux Living’s proposal Monday during its development committee meeting.
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