Two longtime associates of Harry Helmsley are suing the real estate tycoon and his wife, Leona. Irving Schneider and Alvin Schwartz claim that since Harry Helmsley's physical and mental condition deteriorated to the point where he could no longer play an active role in the management of his businesses, Leona Helmsley has blocked payments due them under their lifetime employment contracts. They also allege that Leona Helmsley has "looted" the Helmsley/Spear concern in which they are minority shareholders, transferring assets to other components of Helmsleysą businesses.

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

IRVING SCHNEIDER and ALVIN SCHWARTZ,

Plaintiffs,

against

LEONA HELMSLEY, HARRY HELMSLEY and
HELMSLEY
ENTERPRISES, INC.

Defendants

Index No.
COMPLAINT


Irving Schneider and Alvin Schwartz, as and for their
complaint against the defendants, by and through their
attorneys Squadron, Ellenoff, Plesent & Sheinfeld, LLP,
and Baer, Marks & Upham, respectfully allege as follows:

PARTIES

1. Plaintiff, Irving Schneider ("Schneider"), is a resident
of the City and County of New York.

2. Plaintiff Alvin Schwartz ("Schwartz"), is a resident of
Nassau County, New York.

3. Upon information and belief, Harry Helmsley
("Helmsley") is an individual residing in New York City
and Greenwich, Connecticut. Helmsley also owns, through
the medium of Helmsley Enterprises, Inc., over ninety-
nine (99%) of the outstanding shares of Helmsley-Spear,
Inc. ("H/S")

4. Upon information and belief, since in and after 1990,
Helmsley's health and his mental and phystcal cond1tion
has been such that he does not personally manage or make
judgments or decisions about his holdings and bus1ness.

5. Leona Helmsley ("Mrs. Helmsley"), is an individual
residing in New York City and Greenwich, Connecticut
and is the wife of Helmsley and improperly purports to
act in Helmsley's place w1th respect to Helmsley's
corporate and partnership obligations.

6. Upon information and belief, defendant, Helmsley
Enterprises, Inc. ("H/E") is a Delaware corporation with
its principal place of business at 230 Park Avenue, New
York, New York.

7. At various times between 1990 and the date hereof,
Mrs. Helmsley has been an officer and director of H/S and
H/E, but at all times material here Mrs. Helmsley has used
both H/S and H/E to effectuate the illicit scheme
hereinafter set forth.

JURISDICTION

8. This Court has Jurisdiction over defendants under
CPLR Section 302(a)(1) in that causes of action alleged
herein arise out of bus1ness transacted by these defendants
w1thtn the State of New York.

9. Each of Messrs. Schwartz and Schneider have been
affiliated with H/S for approximately fifly years. During
their tenure and in conjunction with Helmsley, they built
H/S tnto a pre-eminent brokerage and real-estate
management firm which earns fees in the millions of
dollars per year.

ALLEGATIONS COMMON TO ALL CAUSES OF
ACTION

10. Helmsley, as President of H/S and the principal of H/E
(the owner of 2284 of the 2286 shares of H/S) recognized
the unique and substantial contribution of plaintiffs. He
agreed with Schwartz and Schneider for each to become
shareholders of H/S and, in July, 1977, caused H/S and
H/E to enter into a lifetime Employment Agreement with
each of the plaintiffs (the "Employment Agreement.").

11. The Employment Agreement provides that plaintiffs
are to be compensated among other bases, in part on the
basis of H/S gross income, in part on the basis of
commissions received from managing particular
properties obtained through their efforts (including, but
not limited to those specified on exhibits to the
Employment Agreement).

12. On or about June 13, 1989, Respondent H/S agreed
with plaintiffs to increase the compensation of each of the
plaintiffs under the1r lifetime Employment Agreement
by $1,000,000 per year, "retroact1ve to the year ending
December 31, 1988." This amendment to their lifetime
Employment Agreement was memorialized ln a
Memorandum dated June 13, 1989 ("The Memorandum"),
which was signed by Helmsley in his capacity as the
President of H/S. The Memorandum was initialed by Mrs.
Helmsley.

13. Despite due demand, commencing October, 1990,
Mrs. Helmsley improperly caused H/S to fail and refuse to
make the payments required under the Memorandum. As
a consequence, H/S is currently indebted to each of
Schneider and Schwartz in an amount in excess of
$5,700,000, whtch sum continues to accrue on a monthly
basis.

14. Pursuant to the Employment Agreement, each of the
plaint1ffs is entitled to receive override commissions with
respect to each of the properties for which he is the
managing agent. Such override commissions are due and
have always been paid annually 1n the month of March.
In March, 1996, there was due and owing to each plaintiff
approx1mately $234,000 by reason of such commissions,
which sums Mrs. Helmsley caused H/S to refuse to pay.

15. On or about December 31, 1970, H/E and H/S entered
into an agreement, amended August 6, 1974, with
plaint1ffs (the "Option Agreement") wherein, inter alia,
Schwartz and Schneider were greeted the option to
purchase,upon the death of Helmsley, all shares of H/S
owned by H/E. The Option Agreement also grants
plaintiffs the right of first refusal ln the event H/E wishes
to sell or dispose of 1ts shares. More particularly, for the
purposes of this proceeding, the Option Agreement also
provides, in the event plaintiffs choose not to exercise
their option to buy upon the occurrence of e1ther of the'
aforesaid triggering events. that plaintiffs be paid, for a
period of four years, the compensation which they earned
during the last full year of their employment with H/S
(the "Payout Option").

16. Under the Employment and Option Agreements,
plaintiffs are entitled to substant1al payments at the
conclusion of their employment by H/S which payments
are based, in part, on the plaintiffs' level of compensation.
Consequently (because plaintiffs' compensation is
dependent upon the performance! of H/S), the financial
success of H/S is cr1tical to plaintiffs' receipt of the|
ultimate consideration prom1sed to them for their
lifetime employment.

17. Mrs. Helmsley has acknowledged that Helmsley has,
for a number of years, been incapable of understanding
or deal1ng w1th his financial affairs and has been absent
for increasing periods of time from all phases of the
businesses in wh1ch he once engaged, contributing
noth1ng to the conduct of such businesses.

18. Notwithstanding her repeated denials of any
involvement in the business and affairs of H/E and H/S.
and without any lawful authority, Mrs. Helmsley, on her
own behalf and purportedly acting on behalf of Helmsley
and H/E, has engaged in an egregious campaign to loot
H/S and render H/S insolvent so as to disable it from
meeting its obligations to the plaintiffs.

19. Plaintiffs have been obliged to commence and have
commenced an arbitration proceeding seeking an award
directing the payment of the compensation due under the
Memorandum as well & to enforce their other rights
under the Employment and Option Agreements, which
arbitration is now pending.

THE SCHEME TO LOOT HELMSLEY-SPEAR

20. Commencing in or before 1992, Mrs. Helmsley,
separately and in concert with H/E, engaged in an
intentional, calculated and bad-faith effort to transfer
assets from H/S to herself, to H/E and to other entities
controlled by her, without falr consideration. As
hereinafter alleged, while stating to a federal court that
her contribution to H/S was "extraordinarily small," she
extracted over $10 million dollars in compensation from
H/S; Mrs. Helmsley falsified (or caused to be falsified)
corporate records, including a May, 1990 memorandum
that was wholly inconsistent with her representations
concern1ng her lack of involvement with H/S and which
stated that her contribution to H/S was equal to that of
plaintiffs and which directed that her compensation from
H/S be "on equal par with them. Mrs. Helmsley shifted
millions of dollars of costs and expenses to H/S, including
those of a corporate aircraft used almost exclusively for
personal travel; and she caused the creation of fictitious
loans and the imposition of over $3 million in artificial
interest payments.

21. More specifically, and upon information and belief,
the transfers include, but are not limited to, the following:

a. A massive transfer of assets from H/S to H/E of an
amount in excess of $20,000.000. This has been
accomplished by (i) systematically "sweeping," or
emptying the bank accounts of H/S (ii) transferring the
funds therein to H/E on a periodic basis; (iii) 'lending'
money back to H/S so that H/S could pay 1ts bills and
other obl1gatlons as they become due; and (iv) charging
interest to H/S for the loan. The interest for the 'loan',
payable to H/E, has amounted to approximately
$1,000,000 per year over the period 1992 through and
including l995;

b. Use of H/S personnel to work on behalf of interests
controlled by Mrs. Helmsley and H/E without
reimbursement to H/S;

c. The payment without consideration by H/S of the
salaries of certain employees of H/E;

d. The payment w1thout consideration by H/S of certain
expenses of H/E;

e. The payment by H/S of salary to Mrs. Helmsley and
Helmsley in an aggregate amount in excess of $l3,000,000
despite the fact that Mrs. Helmsley and Helmsley have
been almost completely uninvolved in the operation of
H/S;

f. The payment by H/S of the outstanding loan in an
amount in excess of $l,000,000 for an aircraft util1zed
exclusively by Mrs. Helmsley and Helmsley for their
personal, non-corporate purposes. Significantly, the
aircraft is not carried as an "asset" on thc books of H/S.
Additionally, H/S has an outstanding liab11ity on its
accounting records in an amount in excess of $664.000,
which amounts are related to the operation and/or
maintenance of the aircraft; and

g. The transfer of properties for inadequate
consideration, from H/S to H/E or other entities
controlled by the Helmsleys.

22. Among many other properties, at least seventeen
properties owned or controlled by the Helmsleys, or by
entities controlled by them, have been managed by H/S
since their acquisition. Such management has been
satisfactory in all respects.

23. It was always understood that certain properties
owned or controlled by the Helmsleys, or by entit1es
controlled by them, would be managed by H/S (including
but not limited to those denominated in the Employment
Agreement as Management Properties) and that such
management was the fountation of the financia1 success of
H/S and, ultimately, the payments due to plaintiffs.

24. The plaintiffs have made extraordinary contributions
to the wealth accumulated by the Helmsleys in reliance
upon the payments promised to them which, in turn, were
founded upon the understanding that certain properties
would be managed by H/S.

25. The contracts for management of the subject huildings
are valuable assets belonging to H/S 1n accordance w1th
the understanding.

26. In furtherance of Hrs. Helmsley's offort to render H/S
insolvent and unable to satisfy its obligations to the
plaintiffs, Mrs. Helmsley caused seventeen letters, dated
March 29, 1996, to be sent to H/S purporting to terminate
H/S as managing agent for the named properties.

27. Upon information and bel1ef, Mrs. Helmsley is
arranging for the management of the buildings to be
transferred to Helmsley-Noyes, Inc. ("Noyes"), another
entity controlled by the Helmsleys. However, and as an
admission of the satisfactory nature of H/S management to
date, the buildings will be serviced by the same H/S
personnel and the same H/S computer facilities will be
utilized with respect to the management of the buildings
in the exact manner as they have been to date. The result
will be that plalnt1ffs will no longer supervise
management of the propert1es and H/S will not earn the
management fees which H/S would otherwise have earned.

28. Upon information and belief, H/S will receive no
consideration for the aforesaid transfers of the valuable
contractual right to manage the subject buildings.

29. Upon information and belief, the transfers
hereinabove described were made with the intent of
rendering H/S insolvent.

30. Upon further information and belief, at the time of
the transfers, Mrs. Helmsley, and H/E through Mrs.
Helmsley, intended or believed that H/S would incur debts
beyond its ability to pay as they mature.

31. As a result of the fraudulent conveyances described
above, Mrs. Helmsley, H/E and H/S have rendered H/S
incapable of satisfying the obligations owed by H/S to the
plaintiffs.

32. Plaintiffs have no adequate remedy at law.

AS AN FOR A FIRST CAUSE OF ACTION
(DEBTOR AND CREDITOR LAW SECTION 273 -
CONVEYANCES BY INSOLVENT)

33. Plaintiffs repeat and incorporate herein by reference
each allegation of Paragraph One (1) through and
including Paragraph Thirty-Two (32) hereof as if fully
set forth herein.

34. Plaintiffs, by reason of their entitlement to
$1,000,000 in compensation per year, which
compensation has not been paid since April 1990, are
creditors of H/S ln an amount in excess of $5,700,000
each.

35. Upon information and belief, the transfers by H/S 
aforesaid were made for no or insufficient consideration
at a time when H/S was insolvent or was rendered
insolvent thereby.

36. At the time of the transfers, the assets had a
reasonable value in excess of $30,000,000.

37. By reason of the foregoing, plaintiffs are entitled to a
declaration that the conveyances described above are
fraudulent and void as to them, and a Judgment vacating
and setting such transfers aside to tho extent necessary to
satisfy their claims.

AS AND FOR A SECOND CAUSE OF ACTION 
(DEBTOR AND CREDITOR LAW SECTION 279
RELATIN6 TO UNMATURED CLAIMS)

38. Plaintiffs repeat and incorporate herein by reference
each allegation of Paragraph One (l) through and
including Paragraph Thirty-Two (32) hereof as if fully
set forth herein.

39. By operation of the Payout Option under the Option
Agreement, each of Schneider and Schwartz are entitled
to Payout Option payments tn an amount in excess of
$20,000,000. This claim will mature upon the occurrence
of a triggering event under the Option Agreement.

40. By reason of the foregoing, plaintiffs, as creditors
whose rights have not matured, are a) entitled to a
declaration, pursuant to Section 279 of the Debtor and
Creditor Law, that the conveyances described above are
fraudulent and void as to them and b) a judgment vacating
and setting such transfer aside to the extent nocessary to
satisfy thelr claims.

AS AND FOR A THIRD CAUSE OF ACTION
(DEBTOR AND CREDITOR LAW Section 27C -
ACTUAL FRAUD)

41. Plaintiffs repeat and incorporate herein by reference
each allegation of Paragraph One (1) through and
including Paragraph Th1rty-Two (32) and Paragraph
Thirty-Five (35) hereof as if fully set forth herein.

42. Upon information and belief, the transfers, as
aforesaid, were made with the 1ntent of delaying and
defrauding the creditors of N/S and, in particular, to
delay and defraud tho plaintiffs.

43. Upon further information and belief, H/E and Mrs.
Nelmsley were not bona fide purchasers at the Lime of
the transfer and had knowledge of the wrongful and
fraudulent intent and purpose alleged herein.

44. By reason of the foregoing, plaintiffs are entitled to a
declaration that the conveyances described above are
fraudulent and void as to them and judgment vacating and
setting such transfers aside to the extent necessary to
satisfy their claims together with an award of their
reasonable attorneys' fees and disbursements in
connection with this action.

AS AND FOR A FOURTH CAUSE OF ACTION
(DECLARATORY JUDGMENT AND MANDATORY
RELIEF)

45. Plaintiffs repeat and tncorporate herein by reference
each allegation of Paragraph One (1) through and
including Paragraph Thirty-Two (32) and Paragraph
Thirty-Five (35) hereof as 1f fully set forth here1n.

46. The transfers of the assets of H/S, as aforesaid, were
motivated solely by malice and were calculated to cause
1ntentional hanm to H/S so as to render H/S insolvent.

WHEREFORE, plaintiffs demand judgment as follows:

A. On the First Cause of Action, vacating and sett1ng
as1de the transfers from H/S to defendants to the extent
necessary to sat.isfy plaintiffs' claims;

B. On the Second Cause of Action, vacating and setting
as1de the transfers from H/S to defendants to the extent
necessary to satisfy plaintiffs' claims;

C On the Third Cause of Action, vacating and setting
aside the transfers from H/S to defendants to the extent
necessary to satisfy plaintiffs' claims together w1th
plaintiffs' reasonable attorneys' fees and disbursements-,

D. On the Fourth Cause of Action, declaring the transfer
of management of the subject propert1es from H/S to
Noyes null and void and directing that they be returned to
H/S management, and awarding incidental and punitive
damages;

E. On all causes of action, a preliminary and permanent
injunction restraining defendants from transfers of assets
from H/S;

F. On all causes of action, the appointment of a Receiver
to taker control of the assets found to have been
fraudulently transferred;

G. On all causes of action, awarding incidental damages
and punitive damages ln the sum of One Hundred Million
($100.000.000) dollars; and

H. Awarding such other and further relief as the Court
deems necessary.

Dated: New York, New York
May 2, 1996

SQUADRON, ELLENOFF, PLESENT &
SHEINFELD, LLP Attorneys for
Plaintiff Irving Schneider

551 Fifth Avenue
New York, New York 10176
(212) 661-6500


BAER, MARKS & UPHAM
Attorneys for Plaintiff Alvin
Schwartz
805 Third Avenue
New York, New York 10022
(212) 702-5700