Who Is the “Billionaire” Buying Up Newport — PART 1

Thursday, May 23, 2024

 

EDITOR’S NOTE:

Nicholas Schorsch has been buying up a number of Newport’s institutions — restaurants, a brewery, real estate, and much more.

So GoLocal began to ask some questions about the man who has become a major player in one of the world’s leading playgrounds for the wealthy.

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He started his career in Philadelphia and then moved on to become a significant CEO in commercial real estate. A true titan of Wall Street, but with each step, there were controversies.

His business associates include former Pennsylvania Governor Ed Rendell and former Salve Regina President Sister M. Therese Antone.

Schorsch is an accomplished auto collector and counts Jay Leno as a close friend.

Now, nearly 30 interviews later, and after reviewing hundreds of news articles and legal documents, it is clear that Schorsch’s story is very complex.

 

Meet Nicholas “Nick” Schorsch — he is buying up major parts of Newport.

In 2012, Schorsch came to Newport and dropped down $16 million to purchase the waterfront mansion Hopedene. He was a high-flying Wall Street titan, then. 

At the time, the purchase was the second-highest sale in Newport’s history. The home features 21,000 square feet of living space, 15 bedrooms, and 14 baths.

In 2014, Forbes named him a billionaire and then no longer a billionaire.

 

 

In recent years, Schorsch has been on a buying spree — he would say he is investing in Newport. He founded the Audrain Auto Museum — which, in a decade —has become a major tourism attraction. One of his car friends is comedian Jay Leno.

Schorsch, in an interview with GoLocal, makes the point that he now lives in Newport full-time and that “100%” of his five children and six grandchildren all live in Newport. “They all live here, they all pay taxes here, they all go to school here,” said Schorsch, although none attend Newport public schools.

He and his children are close; two individuals who know Schorsch well and have visited his home say that he has a massive staff at Hopedene and that the chef and staff cook all the meals for his five children, and the meals are delivered to each of their homes — three times daily.

Schorsch does big things.

 

Schorsch’s Story: Scrap, Real Estate and Questions

He is the son of a scrap man in the Philadelphia area. The family’s company was held, in part, responsible for creating a Superfund site.

Back in Philly in his late teens and early 20s, Schorsch owned and operated his own company — linked to, but not owned by, the family’s scrap business.

Schorsch’s own company, Thermal Reductions, and a related company, Riverside Metals Corp, paid major fines for safety violations and faced significant charges of environmental crimes.

Then, Schorsch shifted business models.

Schorsch made much of his money in commercial real estate. A dizzying array of companies that lived in the world of real estate in investment trusts (REITs).

And that successful financial career has been blotted with enforcement action by federal and state governments and some massive lawsuits.

Schorsch, his business associate, and his companies were investigated for financial crimes.

One of his top officers was sent to federal prison.

 

One of his business controversies sparked a headline in the Philadelphia Inquirer “Schorsch Real Estate Empire Dogged by Lawsuits and Lies.” Inquirer columnist Joseph DiStefano wrote in 2015, “In a lawsuit filed last week in federal court in Manhattan, investors led by the TIAA-CREF college retirement fund alleged a list of frauds by Schorsch and other past managers, directors, auditors and bankers. The complaint is illustrated by a drawing of a spider’s web bearing the names of 36 Schorsch-related firms and investment funds, with Schorsch’s name in the spider’s place. American Realty ‘lies at the center of a complex web of interrelated companies,’ the suit says. ‘The Schorsch empire was structured to help conceal defendants’ fraudulent scheme.’”

More on Schorsch’s business successes and failures in PART II of this series.

 

Schorsch and Newport: The Connection Started Decades Earlier

‘We start in the 1970s. I have been coming here [Newport] for 53 years,” said Schorsch. He is 63 years old.

Schorsch told GoLocal in a lengthy interview that he has been coming to Newport since he was a boy. His parents, Irvin, Jr., and Anita, were from Philadelphia and were antique collectors as an avocation.

“I was coming here as a child with my parents. My parents were involved in the 18th and 17th-century furnishing, so they would come here on different forums and the big studies,” said Schorsch fondly about his time in Newport as a boy.

The family was not picking up knickknacks; they were serious art collectors. Some of their collection was auctioned off by Sotheby’s in 2016 for more than $10 million.

While the family was buying antiques in Newport in the summer, the family business was tied to environmental crimes in Pennsylvania.

 

 

Superfund Site and Forced to Pay Millions in Clean-Up Costs

The family’s main trade was the scrap business. A rough and dirty business.

Schorsch’s father and uncle owned the scrapyard Metal Bank— a very dirty scrapyard that was ultimately named a Superfund site.

“My father was [a scrap guy], and he developed the first industrial scrap business,” said Schorsch in his interview with GoLocal.

“His family [Schorsch’s father’s] was in it since the early 1920s when they were converting gas lanterns to electric and they would need 100 trucks in the morning to take out the massive amount of brass fittings that they had to just keep going light by light by light and be the end of the you know each crew had a truckload. And so [my father] worked as a corporate scrap guy,” Schorsch told GoLocal.

In 2003, the U.S Environmental Protection Agency issued a press release putting a portion of the blame for the contamination on the Schorschs, Nicholas’ father Irvin, and his uncle John.

“The Metal Bank site is located along the Delaware River in an industrial section of northeast Philadelphia. From 1968 to 1972, Metal Bank salvaged scrap metal and drained oil from used transformers to reclaim copper parts. These activities resulted in oil spills into the soil, groundwater, and river, and soil and groundwater contamination of polychlorinated biphenyls (PCBs), polycyclic aromatic hydrocarbons (PAHs), heavy metals, and volatile organic compounds. In 1983, the Metal Bank site was added to the Superfund ‘National Priorities List.’”

“The U.S. Department of Justice, on behalf of EPA, has sued the current and former site owners and operators – Union Corporation, Metal Bank of America, and Metal Bank owners and officers Irvin Schorsch and John Schorsch – under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA or “Superfund”) and the Resource Conservation and Recovery Act (RCRA). Superfund and RCRA require parties responsible for contaminated sites to perform or pay for the cleanup,” wrote the EPA.

The courts ruled for the feds, and Metal Bank was forced to pay millions.

Nicholas Schorsch would not answer questions about the Superfund site. He was unavailable due to his travel, his office told GoLocal on Monday.

Schorsch’s attorney, Michael Anderson, said in an email to GoLocal, “Metal Bank was a public company with which Nick had no involvement at any time and was never an employee. As we understand the matter, the alleged actions/matters involving Metal Bank matter occurred prior to [when] Nick was born and continued through a time when Nick was 7-8 years old. He had no knowledge, involvement or other role in what occurred at a public company during this period.”

While Anderson was correct that much of the contamination took place during the 1970s, his explanation was contrary to comments Schorsch said a week earlier.

In an interview with GoLocal last week, Schorsch said about the relationship between his family’s company and a separate company he owned, “I took the idea of making finished products, yeah, and I made military products for nuclear reactors and cooling systems and outboard motors for marine boat boats, sacrificial anodes that went on oil rigs — that we would make high, very high specification aluminum, zinc, copper all non-ferrous.  And I had a background as my father was in the scrap business, so we became his largest customer.”

Twenty-three years later, after the company had been sold, a federal court judge in Philadelphia approved an $18 million settlement, of which Irvin Schorsch Jr. agreed to pay $9 million towards the clean-up cost, according to a report in Investment News.

While Schorsch distances himself from his father’s and uncle’s environmental issues, he has his own controversial track record.

 

Safety and Environmental Violations, Threatened Workers

Early in Schorsch’s career, he was an owner and the operator of a number of interrelated companies — businesses that were cited for a string of environmental and safety violations.

Under Schorsch’s leadership, both the federal safety agency OSHA and an environmental regulatory agency repeatedly fined Schorsch’s company for violations from 1983 through 1990.

After one enforcement action by OSHA, Schorsch ridiculed the agency; he told the Inquirer, “As far as we’re concerned, the allegations are completely false. They [OSHA] have to do something to justify their salaries. They have been out here for months. Obviously, they’re not finding what they are looking for, and they are getting irritated.”

However, months later, as the Inquirer reported, Schorsch signed a 23-page consent decree that “described an extensive effort to hinder and obstruct OSHA investigation from mid-May to mid-August. Further, the company admitted it had “carried out a predetermined, systematic plan” to prevent OSHA inspectors from observing and photographing production processes and taking air samples. Schorsch and the company admitted that they gave “the clear impression that anyone caught talking to OSHA inspectors would be disciplined or fired.”

As part of the consent decree, Schorsch’s firm agreed to pay more than $11,000.  This was at a time when the federal government under President Ronald Reagan was criticized for being lax in its environmental and safety enforcement.

But, those violations were minor compared to a second enforcement action by OSHA.

Less than two months later, OSHA announced another enforcement action. According to a report in the Inquirer, “OSHA inspectors found layers of lead dust throughout the plant, resulting from poor ventilation in the work areas, the citation says. Dust samples were taken from the lunchroom, a water fountain, and a vending machine. Lead dust was discovered on the employee’s personal clothing.”

The most disturbing thing was that ”of the 118 employees tested this month, OSHA contents 51 either had the maximum level of lead in their blood or exceeded the maximum.”

Schorsch’s company “removes the lead sheathing and cooper wire from used utility cable and refines the metals for resale.”

Then, in 1990, the Inquirer reported that Schorsch’s company was fined again.

“Thermal Reduction, Inc., a Riverside metal manufacturer, agreed yesterday to pay $11,440 in federal fines for exposing its workers to high levels of lead last winter at its Pavilion Avenue Plant,” according to the Inquirer.

It was the third time OSHA had fined Schorsch’s company.

This time, Schorsch’s company’s “cooperation contrasted with previous inspections, when the company harassed inspectors and threats against workers were documents during lengthy state and federal civil proceedings,” according to the Inquirer.

According to the Inquirer’s reporting, Schorsch’s company “was fined $79,200 in January of 1985 for exposing workers to lead. The firm was fined $43,000 in October 1983 for lead exposure at its now-closed Northeast Philadelphia plant.”

Philadelphia is a long way from Schrosch’s Newport estate.

 

COMING NEXT: Part II, Schorsch the Real Estate Titan

 

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