Illegal hotel settlement

From the Wall Street Journal:

New York City has reached a $1 million settlement with a firm it accused of operating illegal hotels, creating a restitution fund to help defrauded tourists.

Last year, the administration of Mayor Michael Bloomberg filed a lawsuit accusing Smart Apartments LLC and Toshi Inc., a related company that was dissolved, of operating illegal short-stay rooms in about 50 residential buildings in Manhattan and Brooklyn. The city considered the defendants to be among New York's largest operators of illegal hotels.

Also sued was Robert "Toshi" K.Y. Chan, principal executive for both companies. Mr. Chan, who appeared in an Academy Award-winning film, "The Departed," is known for throwing lavish parties in New York.

The settlement, signed Monday by State Supreme Court Justice Arthur Engoron, creates a restitution fund for tourists affected by what city officials described as "misleading practices." Tourists who rented from the company can now seek reimbursement for security deposits or rental payments that weren't refunded between May 1, 2011, and Monday.

According to the agreement, the firm has agreed to stop advertising illegally converted residential apartments for stays of fewer than 30 days. The city said its officials found the company operated hundreds of permanent residential apartments for short-term stays.