Gotham Gazette http://www.gothamgazette.com/component/tags/tag/1865 Thu, 14 Dec 2017 20:31:32 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) Federal Corruption Charges Confirm Systemic Flaws in State Economic Development System http://www.gothamgazette.com/?id=6544:federal-corruption-charges-confirm-systemic-flaws-in-state-economic-development-system http://www.gothamgazette.com/?id=6544:federal-corruption-charges-confirm-systemic-flaws-in-state-economic-development-system cuomo topping off buffalo

Cuomo in Buffalo (photo via The Governor's Office on Flickr)


After laying out multiple corruption and bribery charges against nine players involved with Gov. Andrew Cuomo’s signature economic development program, including his former aide and close friend Joe Percoco, family friend and confidante Todd Howe, and a number of major developers and Cuomo donors, U.S. Attorney Preet Bharara refused to say whether the governor is a target in the probe or if it is reasonable to hold him accountable for the conduct of the people he empowered. The prosecutor noted the case remains open as a “general matter.”

Alluding to things possibly to come, though, Bharara said, "I really do hope that there is a trial in this case, so that all New Yorkers can see, in gory detail, what their state government has been up to.”

Whether or not Cuomo is indeed being investigated, or will see charges, those brought by Bharara on Thursday are an indictment of a system that the governor has presided over, and one that other leaders in state government have done little to oppose.

Cuomo issued a statement lamenting the charges and promising justice will be served: “If the allegations are true, I am saddened and profoundly disappointed. I hold my administration to the highest level of integrity. I have zero tolerance for abuse of the public trust from anyone. If anything, a friend should be held to an even higher standard. Like my father before me, I believe public integrity is paramount. This sort of breach, if true, should be and will be punished.”

Cuomo and his administration have continuously responded to reports about corruption in his economic development programs as though they are surprising and have caught them off guard, but the administration has been receiving warnings for years that the system was being abused.

Watchdogs have been setting off alarms that the state’s economic development system is ripe for corruption, while the press has consistently reported what appeared to be instances of bid-rigging related to the Buffalo Billion and government favors for donors to Cuomo’s electoral campaigns.

All the while, the Cuomo administration has taken the criticism and spun it as attacks on the effectiveness of the investments and on the needy communities they benefit, especially Buffalo. And while the governor did hire an “independent” investigator, Bart Schwartz, to examine and oversee the system last Spring, it was only after the administration was rocked by a storm of subpoenas. Schwartz and his firm can earn up to $450,000 for their work examining the system, a job watchdogs say should have been carried out by the state Legislature, Comptroller, and Attorney General.

Schwartz’s office declined to comment on the charges or what his role will be going forward now that the charges have been unveiled.

“The real story here is the system is broken. Everything we thought was going on, was going on, and is actually worse than we thought,” said John Kaehny, executive director of Reinvent Albany, a group that has been pushing for major reforms to the state’s economic development systems and greater budget transparency.

Kaehny noted that the scandals related to bid-rigging in Buffalo, Syracuse, and Albany involve over $1.5 billion in taxpayer funds. “These indictments shine a light on a broken and corrupt system -- not a few bad apples,” said Kaehny.

Hundreds of millions of dollars in state funds flow through opaque non-profits that the state established, a practice that predates Gov. Cuomo but he has expanded. Large sums of cash are approved in the state budget with little debate and the money is given little scrutiny by the Legislature thereafter.

The major beneficiary of the alleged malfeasance, besides those charged with unfairly winning contracts and those accused of taking bribes, appears to be the Cuomo campaign. Developers involved in the scandal gave generously to Cuomo around the times they won state economic development contracts.

According to Reinvent Albany, three of the executives now charged in bid-rigging schemes are some of Cuomo’s biggest donors. Louis Ciminelli of LP Ciminelli has given Cuomo’s campaign $143,550 in contributions and received over $600 million worth of contracts through state-controlled non-profits. Joe Nicolla of Columbia Development has given Cuomo $320,000 while receiving $190 million in contracts through state-controlled non-profits and Steven Aiello of COR Development has given $338,500 to the Cuomo campaign while receiving $105 million through state-controlled non-profits.

Among those charged is Percoco, a childhood friend of Cuomo’s who has followed the governor throughout his various political positions. Percoco was known as the governor’s enforcer when he worked under him in the Capitol and later as a high-pressure fundraiser when he worked for Cuomo’s campaign. He is accused of using his position to take state action on behalf of contractors in exchange for bribes.

Alain Kaloyeros, now the former head of SUNY Polytechnic, which has awarded contracts to Buffalo Billion developers, was also charged Thursday. Kaloyeros is charged with bid-rigging.

Also charged were developers including Aiello, Ciminelli, and Joseph Gerardi.

Bharara’s office also unsealed a guilty plea by Todd Howe, a lobbyist and Cuomo family friend who has faced financial trouble over the years and was advocating for contractors while also overseeing and working with Kaloyeros.

Up until very recently the system allowed the state to funnel money to two non-profit entities overseen by SUNY Polytechnic. Those entities issued requests for proposal that in several instances were written specifically to only fit developers that had donated generously to Cuomo’s campaign. Bharara charges that Kaloyeros actually tipped his favorite contractors far in advance of issuing an RFP to give them a leg up.

The nonprofits have resisted transparency, only recently opening board meetings to the press. Additionally, the state appears to have been extremely lax in holding recipients of economic development funds to their promises, like how many jobs they plan to deliver or how much a project will cost.

Legislative leaders, the comptroller, and attorney general have raised little fuss about an economic development system that appeared to evade standard state contracting procedures by using a complicated system of nonprofits controlled by the State University to award bids and dole out funding.

Even with the spectre of Bharara’s investigation hanging overhead, the Legislature made no broad attempts to reform the system, instead mostly deferring to the Cuomo administration.

Comptroller Tom DiNapoli’s office raised concerns this year about its ability to audit economic development projects, but DiNapoli has a reputation as being non-confrontational. When an audit of his challenged the effectiveness and oversight of Cuomo’s Excelsior Jobs Program, the administration hit back hard, attacking the competence of DiNapoli’s staff. Cuomo said DiNapoli should “educate” himself and called his audits of economic development's “opinion.” DiNapoli has said he’s not intimidated and that he does his mandated job.

Cuomo and the Legislature actually stripped DiNapoli of the ability to review contracts issued by SUNY and CUNY ahead of time, part of creating a secretive system without clear checks and accountability.

On Thursday afternoon, Attorney General Eric Schneiderman unveiled bid-rigging charges of his own, these having to do with the construction of dorms near SUNY Albany, against Kaloyeros and Nicolla, of Columbia Development. Kaloyeros has spearheaded economic development programs under Cuomo and routinely appeared by Cuomo’s side for years.

According to Schneiderman’s office the investigation took a year and was performed in partnership with the probe by federal agents led by Bharara’s office. Schneiderman accused Kaloyeros, who was the state’s highest paid employee until being suspended without pay on Thursday, of rigging bids to go to developers who in turn directed grants and other benefits to SUNY Polytechnic. Kaloyeros’ compensation package was directly tied to the activity he oversaw at SUNY Polytechnic, therefore he benefited from the bid-rigging.

Last year Kaloyeros contacted this reporter by Facebook messenger after reading and apparently being upset by a story about the role he played in the Buffalo Billion. When asked if he would like to set up an interview to correct any misunderstandings or inaccuracies, he replied that he would like to give a tour of the nano facilities he oversees, but any discussion of federal investigations would be off limits. "The issue we have is confidentiality. We were instructed in no uncertain terms not to comment on the inquiry from down South with the threat of jail which is being interpreted as we are the target of an investigation,” Kaloyeros wrote. “So that part we cannot comment on beyond what we were authorized to say publicly. The rest is not a problem.”

The article attracted attention to Kaloyeros and he later deleted his Facebook profile.

Now with the “gory” details of the charges out for all to see, Reinvent Albany is calling on the state to take quick action to fix the system. It wants the state to freeze any new economic development activity by SUNY Poly and its subsidiaries; a phase out of using state-controlled non-profits to oversee economic development funds; a uniform contract process by the state, public authorities, and SUNY; new pay-to-play controls limiting contributions from those doing business with state entities; the creation of a database that reports the details of state subsidies and contracts given to businesses; and restoration of the Comptroller’s ability to review contracts issued by all state entities before they are signed.

Asked for a comment on Reinvent Albany's reform suggestions in light of Thursday's charges brought by Bharara, a spokesperson for Gov. Cuomo did not respond.

Jennifer Rodgers, executive director of The Center for the Advancement of Public Integrity at Columbia Law School and a former prosecutor who served in Bharara’s office, said that the charges give proof that the state’s economic development system failed.

"As shown by the allegations in the indictment, there was a clear failure here in the oversight of the bidding procedures related to these Buffalo Billion projects,” Rodgers said in a statement. “We need greater transparency in these processes and stronger oversight; hopefully this will prevent recurrences of a situation where public funds made their way into the defendant's' pockets instead of being used for the benefit of the people of New York."

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by David King, Albany editor, Gotham Gazette
     

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Federal Corruption Charges Confirm Systemic Flaws in State Economic Development System Thu, 22 Sep 2016 04:00:00 +0000
For Review, Cuomo Chooses Outside Agent Over Existing State Investigators http://www.gothamgazette.com/?id=6377:for-review-cuomo-chooses-outside-agent-instead-of-existing-state-investigators http://www.gothamgazette.com/?id=6377:for-review-cuomo-chooses-outside-agent-instead-of-existing-state-investigators schneiderman cuomo moreland corruption

Scheiderman, left, & Cuomo, center (photo via The Governor's Office on Flickr)


More than a month after Governor Andrew Cuomo announced that Bart Schwartz, a former federal prosecutor, would head an “independent investigation” into the Buffalo Billion economic development program, it remains unclear whether Schwartz has begun his work and the governor has repeatedly said that his contract with the state is still being finalized. The Buffalo Billion project and other pieces of Cuomo’s economic development programs have drawn scrutiny from the U.S. Attorney and Attorney General Eric Schneiderman due to allegations including bid-rigging that favored large Cuomo donors.

This past week, the State Inspector General’s office issued a report on the source of a leak about an investigation into Mayor Bill de Blasio’s fundraising practices at the State Board of Elections. By all accounts the investigation was conducted expeditiously.The Joint Commission on Public Ethics is also involved in a de Blasio matter as it probes his allies’ lobbying practices. These matters, not to mention the existence of the Attorney General and Comptroller, make it clear that state government already has a number of investigative bodies that would not have required extended contract negotiations and monetary compensation to conduct an investigation of the Buffalo Billion. But, Cuomo decided not to call on an existing investigative body to look at all aspects of his major economic development programs.

Gov. Cuomo’s office did not respond to questions about why an existing agency was not selected. Schwartz’s office declined to respond to questions about whether he had a contract and how many staff he would bring to his review of state economic development programming.

Schwartz’s role is murky given that the U.S. Attorney and Attorney General are now both pursuing widespread investigations. It is unclear what he can do investigatively that won’t interfere with active probes. Government watchdogs say that Schwartz’s appointment would have had an impact when concerns about the bidding process were initially raised, but at this point many believe Cuomo is simply trying to obscure the scope of the federal probe and claim high ground as state integrity is questioned.

“Schwartz’s investigation was triggered by a criminal probe. If he had been brought in years ago, that would have been a different thing,” said John Kaehny, executive director of Reinvent Albany.

Jennifer Rodgers, a former federal prosecutor and head of Columbia Law School’s Center for the Advancement of Public Integrity sees value in Schwartz’s hiring. “There are two things Bart Schwartz brings to the table: independence and resources,” Rodgers said.

“JCOPE is constantly tagged as not independent, and the state IG is ostensibly independent although appointed by the Governor,” noted Rodgers, adding that Schwartz’s firm, Guidepost Solutions, “has all the experts he might need to examine such a complex system: lawyers, former law enforcement officials, computer people - people with a set of skills that the IG and JCOPE would be hard-pressed to bring together.”

While Cuomo has said Schwartz will take a soup-to-nuts approach to his review, no one will know exactly what he is tasked with and how his work will be done until his contract is finalized and made public.

Schwartz’s firm details its approach to internal investigations on its website:

“Guidepost Solutions is frequently called upon by businesses to conduct internal investigations into allegations or suspicions of corrupt or fraudulent conduct by employees. We rely upon our full-time staff of attorneys, forensic accountants, research analysts, field investigators and computer forensics experts to staff these assignments, and we work collaboratively with our business clients to develop an investigative plan that is appropriate to the suspected misconduct...Since most of our investigative professionals have had experience in federal, state and local law enforcement—as prosecutors, auditors and agents—our investigative strategies are developed with an understanding of the evidence that may be needed to support an eventual criminal prosecution.”

The section goes on to state that the team is “equally sensitive to matters of confidentiality and public perception.”

Blair Horner, legislative director of the New York Public Interest Research Group (NYPIRG), said that Gov. Cuomo had a full menu of options to choose from before even considering Schwartz. “The governor had a toolbox he could have gone to to review this, but instead he went out and bought a new hammer.” Critics of the state's approach to economic development, including the Buffalo Billion, have repeatedly said that the state Comptroller should have more oversight of contracts and spending - something Comptroller Tom DiNapoli recently addressed in a series of proposals.

Horner said that the arrangement with Schwartz could technically allow Cuomo to address issues faster than if the IG’s office was investigating.

“Schwartz reports directly to him, so in theory it would all happen faster, although the IG did just turn a report around in a few weeks,” said Horner, referring to the investigation of the BOE leak. “The IG would have to issue a report and the IG would have to act.”

In other words, if the IG’s office was investigating the case the governor wouldn’t be able to fix anything until after a report was released, and the IG would have to recommend actions to be taken, which could include civil cases or referrals to law enforcement agencies for violations of the law, according to New York Executive Law section 53.

The Cuomo administration has said Schwartz will have the ability to review contracts and control cash flow, while also looking for larger fixes to the system, giving him a more proactive role than standard investigators. In an April 29 statement announcing his impending hire, Schwartz said that given the investigation and the administration’s desire to keep the Buffalo Billion program running, “they have asked me to commence an immediate review of all grants and approvals – past, current and future – in certain programs and operations,including the Buffalo Billion/Nano Economic Development Program.”

“It’s belt and suspenders, but I’d rather have it that way,” Cuomo told reporters in New York City last week, referring to redundancy and noting that he will consider making changes to economic development programs depending on the findings. Cuomo aides have periodically reminded reporters that Schwartz will also have direct approval of contracts and cash allocations. No one has confirmed whether Schwartz has indeed begun his work.

Last week, when asked if Schwartz’s report would be made public Cuomo appeared less sure of what Schwartz would be doing and admitted he had yet to secure a contract with him. “He is being hired as an independent to do an independent review,” said Cuomo. “I don’t know what his standard protocol is. I wouldn’t have a problem with [making his findings public], but I don’t know how he operates.”

Cuomo’s aides later clarified Schwartz’s report would be made public if it didn’t interfere with the U.S. Attorney’s investigation. It is unclear if there has been communication between Schwartz and U.S. Attorney Bharara’s office.

Kaehny of Reinvent Albany said he finds it a “stretch of the imagination” to think the governor could appoint someone to investigate the Buffalo Billion matter when the crux of the federal investigation appears to hinge on whether contracts were exchanged for major donations to the governor’s campaign.

“He could have asked the Attorney General and Comptroller to jointly choose an investigator and signed an MOU [memo of understanding] that would give them access to the documents they need. It would have been highly credible, people would believe it.” He noted that “most observers don’t think of the IG or JCOPE as independent” and so wouldn’t have the ability to “give the governor a clean bill of health.”

Rodgers said a joint investigation by Attorney General Eric Schneiderman and Comptroller Thomas DiNapoli, both Democrats like Cuomo who are known to have strained relationships with the governor, could have appeared independent but the relational friction could have prevented the governor from wanting to hand them the keys to his signature economic development program. She noted both offices would have the resources necessary for an investigation the scope of the Buffalo Billion.

The main question surrounding Schwartz’s usefulness in the matter remains exactly what Cuomo has tasked him with investigating. Cuomo has repeatedly said that Bharara’s investigation focuses on two men, longtime associates Todd Howe and Joseph Percoco, something disputed by those familiar with the investigation.

On Thursday Cuomo was asked whether he has been told by the U.S. Attorney’s Office that its probe focuses on only a few people. Cuomo said that he hadn’t but that he believes the actions of a few people are at issue.

“Our investigator will talk to hundreds of people, but it’s about the actions of several people,” Cuomo said, adding that he would consider changes to economic development practices if Schwartz’s indicates they are necessary.

“There are major question marks around the scope of his engagement and the access he will get,” Rodgers said of Schwartz. “He has the tools and independence, but what was he asked to do with them? That is why it's so important we see a contract.”

While Schwartz’s role has remained unclear, U.S. Attorney Preet Bharara’s investigation into alleged bid-rigging in Cuomo’s economic development initiative appears to be quickly expanding; last week the U.S. Attorney’s office and Attorney General Eric Schneiderman's office conducted a joint raid on the headquarters of SUNY Polytechnic, the organization that oversees Buffalo Billion contracting. The raid appeared partly targeted at the office of Howe, a Cuomo ally and lobbyist, who has lobbied the administration while also representing semi-governmental entities and remaining close with key players in the Cuomo administration.

A recent Wall Street Journal story revealed emails showing that Howe, someone Cuomo himself has said is a target of the probe, had a close hand in guiding SUNY Poly head Alain Kaloyeros as well as directing conversations with the governor’s top aides about how to do so. Cuomo insisted last month that he wasn’t close friends with Howe. On Thursday he said otherwise, telling reporters “I know Todd Howe. I’ve known him for many years. He worked for nano, he’s worked on a lot of these projects. But it’s also irrelevant. If anyone does anything improper, they will be punished to the fullest extent of the law, period.”

Kaehny said that Schwartz’s appointment has in a way already failed the administration. “The problem Schwartz faced from the very first moment is that his client is the governor, and the people targeted by subpoenas are extremely close to the governor,” said Kaehny, adding that it is hard to have faith in an investigation launched by the governor himself. However, it won’t be clear exactly what kind of investigation Schwartz is undertaking until his contract is made public, if one is indeed signed.

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by David King, Albany editor, Gotham Gazette
     

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For Review, Cuomo Chooses Outside Agent Over Existing State Investigators Sun, 05 Jun 2016 04:00:00 +0000
IBM Hired Influential Lobbyist Months Before Securing Buffalo Billion Deal http://www.gothamgazette.com/?id=6356:ibm-hired-influential-lobbyist-months-before-securing-buffalo-billion-deal http://www.gothamgazette.com/?id=6356:ibm-hired-influential-lobbyist-months-before-securing-buffalo-billion-deal IBM sign

IBM (photo: Patrick via Flickr)


International Business Machines (IBM) has a long history in New York - its headquarters is located on the New York-Connecticut border in Armonk; it used to be one of the largest employers in the state; and it was part of a 2011 deal to bring $4.4 billion in investments to upstate New York through the creation of a high-tech computer chip manufacturing plant. The success of the company and the overall state economy have travelled similar paths, both flourishing at times, but when IBM laid off scores of employees, the state suffered.

Given its massive business interests it isn’t surprising that the company contracts with a host of New York-based lobbying firms. But IBM’s choice of a new firm in 2013 is raising eyebrows.

That year, as Gov. Andrew Cuomo ramped up his Buffalo Billion economic development program, IBM retained Whiteman Osterman & Hanna LLP. A few months later, IBM was part of a September 2013 Buffalo Billion deal that saw the state pledge $55 million to create information technology infrastructure in the beleaguered western New York city Cuomo had targeted for roughly a billion dollars of investment. In turn, IBM pledged to bring 500 information technology jobs to the area.

Whiteman Osterman & Hanna is one of Albany’s largest firms, with 75 attorneys, a wide variety of service offerings, and a location across the street from the state capitol. The firm has been influential in securing development deals with SUNY Polytechnic and its nonprofits that oversee the distribution of Buffalo Billion funds.

The Washington, D.C. subsidiary of Whiteman Osterman & Hanna, formerly run by lobbyist Todd Howe, is a target of the federal probe into the Buffalo Billion by the office of U.S. Attorney Preet Bharara, and the Cuomo administration has banned state employees from interacting with that subsidiary, WOH Government Solutions.

Whiteman, Osterman & Hanna is deeply involved in a web of relationships surrounding the Buffalo Billion program. Hiring the company is an apparent gateway to major business with state entities.

IBM retained WOH for the first time in early 2013, according to filings with the Joint Commission on Public Ethics (JCOPE), a state regulatory body that tracks lobbying. In September of that year SUNY Poly entered into a deal with IBM, which would see the state invest $55 million into the Buffalo Information Technologies Innovation and Commercialization Hub. The hub is being designed and built by the state and IBM, other information technologies firms will have access to its resources. Cuomo announced the project in February 2014.

IBM promised in return to bring the 500 new information technology jobs to Buffalo by September of 2020. Company officials have stressed that not all of the jobs will be IBM employees - they expect some to be provided by firms that deliver services to the technology center.

Essentially, the state funded the creation of a ready-to-use research center and has handed it over to IBM while expecting other businesses and state agencies to also utilize the infrastructure.

“New York State will commit, through CNSE (College of Nanoscale Science and Engineering), $55 million, which includes $25 million to establish an open innovation facility and $30 million to purchase IT equipment and software to be used at the Buffalo Information Technologies Innovation and Commercialization Hub,” reads a February 2014 announcement from the Cuomo administration. “The Hub will be owned by New York State with IBM as the first anchor tenant and made available to all IT units at all state agencies. The facility will open in early 2015 in downtown Buffalo.”

Jerry Gretzinger, spokesperson for SUNY Polytechnic, said that funding for the project is going towards purchase of the building, infrastructure, equipment, and installation. “IBM has taken up residence in Buffalo with hundreds of employees working in Key Tower. The company is receiving no funding, which is consistent with the state's economic development model,” Gretzinger told Gotham Gazette.

The federal probe into the Buffalo Billion appears to be examining possible bid rigging around the construction contracts for both the SolarCity project and the information technology innovation center. There are concerns the requests for proposals (RFPs) for both projects were designed specifically for large Cuomo donors to win. McGuire development, winner of the information technology innovation center contract, donated $35,500 to Cuomo from December 27, 2013 to October 12, 2014. The project was announced in February 2014. The largest single donation from McGuire Development, $25,000, came in May of 2014.

McGuire development wasn't the only major Cuomo donor to benefit from IBM's participation in the Buffalo Billion. The New York Times reported on Tuesday that Ciminelli Real Estate lost a major tenant at its property, The Key Tower, in 2013 - IBM has since moved in to the tower as part of its deal with the state. Paul Ciminelli, head of Ciminelli Real Estate, has donated $9,000 to Cuomo. His brother Louis Ciminelli, head of LPCiminelli, donated $29,200 to Cuomo in January 2014, just before the firm was awarded a contract, now reported to be under federal investigation, to develop parts of the Buffalo Billion. The Times found that the Ciminellis and their associates have donated $150,000 to Cuomo's various campaigns.

Recent subpoenas appear to target the relationship between former Cuomo aides Todd Howe, the aforementioned lobbyist, and Joe Percoco and work they did lobbying for clients to win Buffalo Billion contracts. No one, including IBM, has been charged with any wrongdoing.

Three sources familiar with the workings of the Buffalo Billion program say that WOH and Howe’s D.C. subsidiary were seen as critical in getting the attention of the Cuomo administration on Buffalo Billion projects. IBM did not return requests for comment, neither did WOH. WOH’s website advertised Howe and the services he could provide for New York clients until the page was removed after news broke of Bharara’s probe into Howe’s relationships and dealings.

JCOPE filings show IBM paid WOH a combined $240,000 in 2013 and 2014 and $120,000 in 2015. WOH was the only new New York-based lobbying firm IBM hired in 2013. The filings do not list any lobbying activity by WOH on behalf of IBM on any specific legislation or issue. However, the WOH employee listed on the disclosure, Richard Leckerling, a partner at WOH specializing in government contracts and government relations, is listed as managing the account. Another WOH lobbyist listed on the disclosure, William Crowell, is shown to have the sole area of practice as government relations according to the firm’s site. Leckerling did not respond to requests for comment.

Leckerling also serves on the board of the SUNY Poly’s children’s museum along with three members of SUNY Poly.

The Investigative Post has detailed Leckerling’s involvement with the two nonprofits that SUNY uses to funnel money to Buffalo Billion projects.

Fuller Road Management Corporation, one of Suny Poly’s nonprofits, paid $330,000 in legal fees to WOH from 2012 to 2014, according to The Investigative Post. Meanwhile, Leckerling has attended meetings of SUNY Poly’s other nonprofit, Fort Schuyler Management Corp.

Robert Samson, former head of IBM’s global public sector, serves on the board of Fort Schuyler Management Corp. Samson has served as a technology advisor to Cuomo and has donated to Cuomo’s campaigns. He joined the Fort Schuyler board in 2014.

The Whiteman Osterman & Hanna website advertises its government affairs work and ability to help clients land government business. “Whiteman Osterman & Hanna’s focus on matters at the intersection of the private and public sectors has led to the natural development of a vibrant practice of advising and assisting commercial enterprises and public entities through the state and municipal procurement processes. Based in Albany, New York, the Firm has represented commercial enterprises in a wide range of commodity and service procurements, including telecommunications, information technology, industrial supplies, food commodities, and environmental and financial services,” reads the firm’s site.

State law bans lobbying on procurement after the state issues requests for proposals, but IBM’s residency in the technology center did not come about as the result of an RFP. Like a host of other subsidy projects aimed at large corporations, negotiations around IBM’s involvement in the Buffalo Billion appear not to have taken place in public or through a public process.

SUNY Polytechnic reported doing business with WOH in 2015 for $2,056. The work is listed as lobbying related to “higher education” and involving the Assembly, Senate and executive branch. SUNY Poly’s founding president and chief operating officer, Dr. Alain Kaloyeros, is also a target of the U.S. Attorney’s investigation.

As the Buffalo Billion probe has ramped up and become more public, Whiteman Osterman & Hanna fired Todd Howe, a Cuomo family confidante who worked on at least one of Andrew Cuomo’s campaigns. Howe worked with SUNY Polytechnic as well as a number of firms with business before the state that won contracts with the Buffalo Billion while he ran the WOH subsidiary in D.C.

Howe worked for former Governor Mario Cuomo for a decade and is reported to have been a key member of the Cuomo clan. He worked for Andrew Cuomo during his time at HUD and on his reelection campaign and has done fundraising work for him. Howe landed major clients as a lobbyist because of his status as a Cuomo insider. At the same time, a recent New York Times profile painted a picture of someone struggling to hide a serious personal financial crisis while maintaining the image of a successful lobbyist. The Cuomo administration issued statements acknowledging there may have been improper lobbying involving Howe and Percoco, who was a long-time aide to Andrew Cuomo.

Cuomo has sought to distance himself from Howe. “I wouldn’t call us close friends,” the governor told reporters earlier this month. “He worked for the state for a number of years, but I had no knowledge of his personal situation.”

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by David King, Albany editor, Gotham Gazette
     

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IBM Hired Influential Lobbyist Months Before Securing Buffalo Billion Deal Tue, 24 May 2016 04:00:00 +0000
Buffalo Billion Probe: Bad Apples or Broken System? http://www.gothamgazette.com/?id=6331:buffalo-billion-probe-bad-apples-or-broken-system http://www.gothamgazette.com/?id=6331:buffalo-billion-probe-bad-apples-or-broken-system cuomo buffalo billion

Gov. Cuomo in Buffalo (photo via The Governor's Office)


As U.S. Attorney Preet Bharara’s office issues a storm of subpoenas to the administration of Governor Andrew Cuomo and his close associates in relation to the state’s Buffalo Billion economic development program, the governor and his aides have delivered a consistent message: the investigation targets the dealings of a few bad apples, the governor wasn’t aware of any wrongdoing and he wants to get to the bottom of the situation as quickly as possible.

“I’ve said to all my people, and I’ve said to the U.S. attorney, any way we can find out and be helpful and be cooperative, we will be,” Cuomo told reporters during a press conference in the Adirondacks on Tuesday. “Nobody wants the facts more than us. That’s why we started our own private investigation. We know the questions: did two people act improperly? Did they represent companies they shouldn’t have? Was there undue influence for those companies? Those are the questions, we now need the answers and we don’t have the answers.”

The message rings as spin to a number of expert observers who insist Cuomo has long overseen a system that allows, at the very least, for the appearance of pay-to-play to flourish as mini-economies have popped up around the state where connected consultants work with both state government entities and those looking to win state contracts, and where the state funnels money through non-profits, allowing them to avoid scrutiny and standard state contracting procedures.

Bharara’s probe appears to have also spurred inquiries into surrounding issues by Attorney General Eric Schneiderman and Comptroller Thomas DiNapoli - all of whom, like Cuomo, are Democrats.

It is unclear whether the two men who have been reported to be at the center of the probe - longtime Cuomo aide Joe Percoco and Cuomo family associate and lobbyist Todd Howe - violated the law or how Bharara’s many subpoenas that have targeted the executive chamber, former Cuomo aides, consultants, and businesses involved in the Buffalo Billion all fit together. However, the scope of the investigation and the deep layers of connections between and among some of the players involved makes it fairly clear that the target of Bharara’s investigation is not simply two Cuomo associates.

Unlike New York City, New York State has no restrictions on what is referred to as “pay-to-play.” Donors with business before the state are allowed to contribute the same amount as anyone else to a candidate campaign.

Meanwhile, the checks that exist on how the state awards contracts have been subverted by the use of non-profit entities that aren’t subject to the same regulations. State Comptroller Tom DiNapoli and other government and budget watchdogs have criticized the proliferation of these entities and called for reform.

When acknowledging that investigators are looking into actions by individual actors and decisions that were made by state entities, Cuomo also announced “our own investigation with a private investigator who was from the U.S. attorney’s office originally, Mr. Bart Schwartz.” Though it is being explained differently, the move is seen by some watchdogs as designed only to target specific contracts and not intended to address what they say is a flawed system plagued by the appearance and risk of corruption, if not worse.

“The governor is trying to get in front of this issue and is saying a couple of people did something wrong, but the reality is that the entire system is ripe for corruption,” said Ron Deutsch, executive director of The Fiscal Policy Institute, an independent group that analyzes New York fiscal issues.

Cuomo spokesperson Dani Lever declined comment, but pointed Gotham Gazette to a statement issued by Cuomo counsel Alphonso David. (Another Cuomo aide emailed a sarcastic comment to Gotham Gazette.)

Alphonso David issued a statement just as the New York Daily News broke a story April 29 revealing that Percoco is a target of Bharara’s probe, acknowledging allegations and announcing the independent investigation.

“This [federal] investigation has recently raised questions of improper lobbying and undisclosed conflicts of interest by some individuals which may have deceived state employees involved in the respective programs and may have defrauded the state,” David wrote. “We take violations of the public trust seriously and we believe these issues must be resolved by further investigation by the U.S. Attorney. In the meantime, and as the [Buffalo Billion] program operates on a daily basis, the Governor has ordered an immediate full review of the program. Any grants made by this program will be thoroughly scrutinized – past, current or future.”

David went on to say: “Ensuring the integrity of the contracting process for this program is paramount, so that the Buffalo Billion and Nano program can continue creating new jobs and revitalizing Upstate’s economy.”

The statement wasn’t reassuring for many watchdogs, especially those who have long-criticized the Buffalo Billion program.

“The governor is looking at it in terms of the mistakes, or poor behavior of a couple aides that he seems to be disassociating himself with,” said John Kaehny, executive director of Reinvent Albany. “But what the subpoenas are targeting seems to be the corruption risk and bid-rigging favoring the governor’s campaign contributors. No one cares Todd Howe did something dumb. This is not what this is about - the governor sidestepped the larger issues.”

At least six current or former members of the Cuomo administration have been targeted by subpoenas. The administration has defended some of them.

A review of a number of businesses targeted by Bharara’s subpoenas shows that most of them are regular contributors to Cuomo’s campaigns. That leads some observers, including Kaehny, to believe that Bharara is interested in the state’s economic development subsidy programs as a whole.

“The Buffalo Billion is just a microcosm of the pay-to-play racket that has engulfed economic development under Governor Cuomo,” said Kaehny. “It is just a giant machine that takes in donations and doles out grants to donors. It is remarkable in its scope, consistency, and is dramatic in how it all leads back to the same people. What caught Bharara's interest in this is a system - not a rogue agent, not a bad apple, it's a system.”

Jennifer Rodgers, formerly of the U.S. Attorney’s office and current executive director of Columbia’s Center for the Advancement of Public Integrity, said she does not believe that is the case.

“I wouldn't say the fact that the U.S. Attorney is involved means it is systemic,” said Rodgers. “This is important enough even if it is just two guys who took bribes for grants with their position, and importance makes it a very worthy case to pursue. If I learned two guys were taking all this money and were involved in these subsidies, I would think they were good targets,” said Rodgers.

However, Rodgers said she understands why there is suspicion about the overall system. “I think it is a disaster of a system that everyone in good government sees as asking for trouble - there is no oversight. At the same time, it is not the U.S. Attorney's job to change the system. Their job is to charge guys with criminality. I could see issuing a grand jury report that says ‘by the way this system is asking for trouble,’ but it is not the crux of what he does.”

Blair Horner, executive director of the New York Public Interest Research Group, said without knowing what Bharara knows, it is impossible to judge what he is really after. “But I would say opacity in government increases the risk for corruption. What is so notable about how the Cuomo administration operates is they keep their decision-making process behind closed doors and he only shows the public what he wants them to see. This is the governor who ordered agencies to delete their emails and who still hasn’t told us how the Tappan Zee Bridge will be funded and it’s half completed.”

Gerald Benjamin, a professor of political science at SUNY New Paltz noted that the fact SUNY Polytechnic President Alain Kaloyeros has been subpoenaed and appears to have been a target of the probe since the fall, “makes it a much bigger matter that could be focused on systemic practices.”

Kaloyeros has overseen much of the Buffalo Billion contracting and has become a major figure in the Cuomo administration as the governor has ramped up his economic development programs.

“The issue we have is confidentiality,” Kaloyeros told Gotham Gazette by Facebook messenger last fall when being asked about the Buffalo Billion investigation. “We were instructed in no uncertain terms not to comment on the inquiry from down South with the threat of jail which is being interpreted as we are the target of an investigation. So that part we cannot comment on beyond what we were authorized to say publicly."

Gov. Cuomo has distanced himself from Percoco and Howe. Percoco, who has been characterized as a third son to Mario Cuomo, worked at Andrew Cuomo’s side since his days at HUD. Percoco left the administration for part of 2014 to run the governor’s reelection campaign. He later filed income disclosure forms with the Joint Commission on Public Ethics (JCOPE) revealing he received income from two developers with business before the state while managing the governor’s campaign.

Todd Howe, the Washington lobbyist who had a relationship with Mario Cuomo and worked for Andrew Cuomo’s 2014 campaign under Percoco, has been involved in steering donations from contractors to Cuomo and attended a fundraiser with Cuomo as recently as December, according to Politico New York, which reported that Howe steered donations from “several development and energy companies” to Cuomo’s reelection campaign.

Cuomo has said he allowed Percoco to take on outside work because he was strapped for cash. The governor has denied he had much of a relationship with Howe. Cuomo rejected the idea that he should have questioned Percoco on whether his outside clients had business with the state, telling reporters on Tuesday, “No. The state has tens of thousands of employees; they’re not supposed to be cross-examined to make sure they’re following the rules, right?”

Horner rejected Cuomo’s assertion that he shouldn’t have kept himself apprised of Percoco’s outside work. “It is the governor’s responsibility. He allowed Percoco to take outside work in the first place. This guy is not a hands-off administrator. That being said, he can’t know everything.”

Aside from the red flags sent up by donations and dealings with the air of conflict of interest, watchdog groups say they believe Bharara may be examining the Buffalo Billion because it is clear that up until now on one on the state level has been.

Cuomo and the Legislature crippled the Comptroller’s ability to audit deals made regarding the Buffalo Billion in 2011, DiNapoli and others say, by passing legislation that prevented auditing of SUNY, CUNY, hospital or construction funds. That is important to the Buffalo Billion because the state funnels cash for Buffalo Billion contracts through two non-profits controlled by SUNY.

On Wednesday, DiNapoli unveiled a series of proposals to bring more transparency to state spending - a few which would likely impact how the state funds the Buffalo Billion. His plan would ban lump sum appropriations, create a council to plan capital spending, and require economic development program proposals to be scored and ranked in a public database.

“Public authorities are not subject to the same checks and balances that apply to state agencies, resulting in hundreds of millions of dollars being spent annually with limited oversight,” reads the release from DiNapoli’s office. “DiNapoli’s proposal would require state-funded public authority projects to be scored and ranked using measurable and objective criteria. His proposal also requires more disclosure of public authorities’ spending and financing activities.”

Deutsch has been advocating for such a database for years. “My entire career I've been calling the efficacy of these programs into question,” said Deutsch. “We saw Empire Zones move to cater to where businesses wanted to be rather than have them come to economically disadvantaged areas,” Deutsch said of an economic development program that was a hallmark of Republican Governor George Pataki. “Every once in awhile there's a bad deal, or someone breaks the law and people pay attention for a little while.”

While calling for his own investigation of the Buffalo Billion, Cuomo has simultaneously downplayed the role of the state’s existing ethics body in preventing possible conflicts of interest. Asked whether JCOPE should have flagged Percoco’s filing that showed him taking income from groups with business before the state, Cuomo told reporters on Tuesday: “JCOPE has proven effective. Can an agency always be more effective? But I don’t think this is about JCOPE. We’re looking at two individuals to see if they’ve done anything improper. The first responsibility lies with that individual.” Cuomo also told reporters that you have to engage in criminality to be a target of JCOPE.

JCOPE is able to give administration officials guidance in taking outside work. It is unclear if JCOPE issued such an opinion in the case of Percoco. The commission has been headed by a succession of three Cuomo aides since its inception. Seth Agata, the new and third head of the commission, once served as Cuomo’s counsel, where he wrote to JCOPE to ask for clearance for Cuomo to earn hundreds of thousands of dollars to write a memoir for a company that has business before the state. Permission was granted.

The Legislature has shown little interest in reforming how the state doles out subsidies. Senate Majority Leader John Flanagan, a Republican from Long Island, told State of Politics on Wednesday that the state should be “forging ahead” with current economic development programs. “The executive has an inherent responsibility to be overseeing these projects from start to finish,” Flanagan said. “I don’t think we should be scaling back anything. Can we take a closer look, put it under a microscope, fine. But people need jobs. This is a great way to create economic development.”

Cuomo’s creation of an independent investigation is worrying to some because of the governor’s history with independent commissions.

“Bart Schwartz is not independent, Alphonso David is not independent, Seth Agata is not independent,” said Kaehny. “The public will not get the truth unless the facts are independently accessed and the governor is incapable of investigating himself. We’ve seen what happens when the governor says ‘Follow the money wherever it may lead’ - as soon as the money brought [the] Moreland [Commission to Investigate Public Corruption] back to the governor and his real estate contributors at REBNY, Cuomo pulled the plug...No one is good at investigating themselves,” said Kaehny.

Rodgers, of CAPI, said that she has faith in Cuomo’s independent investigation. “The U.S. Attorney's Office will proceed with their work regardless of what internal investigation is going on,” said Rodgers. “And Bart Schwartz being chosen to head the internal investigation is a good sign for the credibility and independence of whatever findings he makes. If the governor's office had chosen someone with less credibility, you could see that there might be suggestions about tampering with witnesses and other evidence (i.e. that the governor's investigation might try to taint the government investigation during their own evidence collection), but I don't think you'll see any of that here with Bart in charge.”

Asked if voters should have faith in Schwartz’s investigation, Horner replied, “They should have faith in Preet Bharara.”

On Thursday, following the sentencing of former Republican Senate Majority Leader Dean Skelos, Bharara issued a statement trumpeting the conviction and sentencing of Skelos and former Democratic Assembly Speaker Sheldon Silver. The statement included a reference to Cuomo-controlled investigations. “These cases show--and history teaches--that the most effective corruption investigations are those that are truly independent and not in danger of either interference of premature shutdown.”

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by David King, Albany editor, Gotham Gazette
     

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Buffalo Billion Probe: Bad Apples or Broken System? Thu, 12 May 2016 04:00:00 +0000