New York state lawmakers indicted on bribery and money laundering charges

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N.Y. State Sen. Carl Kruger and Assemblyman William Boyland surrendered to authorities on Thursday, after being charged for allegedly selling their influence to hospitals, real estate developers and lobbyists.

N.Y. Sen. Carl Kruger allegedly took over $1 million to grant political favors.

Prosecutors said that Kruger, a longtime Brooklyn Democrat, received over $1 million in bribes since 2006. Much of his illegal activities were connected to prominent Albany lobbyist Richard Lipsky, with whom he shared fees, and then took “the very official acts in favor of which Lipsky had been paid to lobby.”

In one instance, Kruger helped steer $500,000 in taxpayer monies to one of Lipsky’s clients.

The court documents claim that Kruger regularly worked with Lipsky to ensure that his clients received favorable treatment on issues that required government approval. Kruger sought to conceal the bribes and kickbacks, passing them through a bogus company called Adex Management, and then further through a shell company, Olympian Strategic Development.

Olympian was controlled by Dr. Michael Turano, the son of Kruger’s close friend Dorothy Turano, a local community board director.


Boyland, a four-term Democrat, was hired as a “no-show employee” at Brookdale Hospital, which at the time, was seeking approval in Albany for its expansion plans. Boyland picked up $177,000 under the sham arrangement.

Besides the lawmakers, several others were indicted in illegal schemes. David P. Rosen, of Medisys Health Systems, who gave Boyland the “no-show” job; hospital executives Robert Aquino and Solomon Kalish; real estate developer Aaron Malinsky and Dr. Turano.

The 53-page complaint detailed the FBI’s investigation which included bugs on Kruger and Lipsky’s phones, recording months of conversations and regular surveillance.

The men were charged on various counts of bribery, mail and wire fraud, and money laundering.

Preet Bharara, of the U.S. Attorney’s office in Manhattan said “Once again I am here to report, sadly, that the crisis of corruption continues in Albany.  Every single time we arrest a state senator or assemblyman it should be a jarring wakeup call,” he added. “Instead, it seems like no matter how many times the alarm goes off Albany just hits the snooze button.”

Information from The New York Times

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Cuomo takes aim at supersized school superintendent salaries

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Cuomo thinks some public school superintendents salaries need to be capped.

Perhaps at an annual salary of $179,000, New York Gov. Andrew M. Cuomo is a bargain. On the other hand, perhaps more than a few of the state’s public school superintendent’s salaries are over-the-top inflated. At least that’s what comes to mind upon hearing what the hamlet of Syosset on Long Island is paying its school chief, Carole G. Hankin: $386,868. Her total package including benefits, expense accounts and other comp: $506,000.

Singled out by Cuomo in his budget address as an example of excess in many school districts, Hankin earned more than any other school superintendent in the state.  According to the New York Times, Cuomo’s remarks set the tone for his proposed reduction in local school aid by $2.5 billion, to help balance the state’s budget deficit.

“I understand that they sometimes have to manage budgets, and sometimes the budgets are difficult,” he said. “But why they get paid more than the governor of the state I really don’t understand.”

Currently over 40 percent of public school superintendents make more than $200,000 per year in salary and benefits, and there is no state regulation on how much they can earn.

While state attorney general, school superintendents caught Coumo’s attention, with a practice many were involved with, called double-dipping. While retired and collecting substantial pension checks, many superintendents continued to work in other school districts, and earning large salaries.

Given the current finances of the state, and local school districts, Cuomo said that the practice was unaffordable and just plain wrong.

New Jersey’s Gov. Chris Christie is also trying to make sense of the outsized salaries paid to public school administrators in the Garden State. He recently set a cap on the salaries of most of the state’s medium-sized school districts at $175,000 – the same salary paid to the governor. The cap, which triggered a lawsuit by the New Jersey Association of School Administrators, would require over 70 percent of the superintendents to take a pay cut.

School superintendents don’t see the issue the same way as state officials and taxpayers.

Robert J. Lowry, Jr., the deputy director of the New York State Council of School Superintendents said, “The state and the schools are facing difficult times that ultimately require strong leadership. Superintendents are trying to provide that leadership, and in many districts, they have passed up raises or made other concessions to save money for their districts and also to set an example.”

The New York Times

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Madoff Trustee demands $300 million from N.Y. Mets owners

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The owners of the Mets turned a blind eye to Bernard Madoff’s massive fraud, reaping $300 million in false profits and using a large chunk to run the team, according to a lawsuit unsealed Friday. The lawsuit claims the owners were so dependent on the disgraced financier’s too-good-to-be-true returns that it “faced a severe and immediate liquidity crisis” when Madoff’s crimes were revealed in 2009.

The searing allegations were made by Irving Picard, the trustee appointed to recover funds for investors burned by Madoff’s scheme. The suit filed by Picard in federal bankruptcy court in Manhattan names Sterling Equities, along with its partners and family members, including Mets owner Fred Wilpon, team president Saul Katz and chief operating Jeff Wilpon, the owner’s son. Picard said Sterling withdrew over $94 million in fictitious profits from Mets accounts with Madoff.

“Given Sterling’s dependency on Madoff, it comes as no surprise that the partners willfully turned a blind eye to every red flag of fraud before them,” Fernando A. Bohorquez, Jr., a lawyer representing Picard, said Friday.

The suit had been filed under seal in December while the parties tried to work out a settlement. But lawyers told a judge this week that talks had collapsed and consented to having the complaint made public. Its opening salvo: “There are thousands of victims of Madoff’s massive Ponzi scheme. But Saul Katz is not one of them. Neither is Fred Wilpon.”

The complaint alleges the partnership “received approximately $300 million in fictitious profits” from hundreds of accounts opened with Madoff’s firm. Of that, it says, $90 million of “other people’s money” were withdrawn to cover day-to-day operations of the Mets.

Wilpon and Katz fired back Friday with a statement calling the suit “an outrageous strong-arm effort to force a settlement by threatening to ruin our reputations and businesses we built for over 50 years.”

The pair called the accusations “abusive, unfair and untrue,” insisting they were victims of the fraud. “We should not be made victims twice over — the first time by Madoff and again by the trustee,”  they wrote.

The lawsuit said Wilpon and Katz had meetings with Madoff in his office at least once a year, a privilege few investors enjoyed, and Katz at times spoke directly with Madoff at least once a day. It also said Wilpon and Katz maintained investments in Madoff accounts, even though Ivy Asset Management expressed concern in 2002 and the Sterling Stamos hedge fund warned repeatedly Madoff was “too good to be true.” The suit said a Sterling consultant advised Katz something was amiss in 2003, and Merrill Lynch warned them about Madoff as early as 2007.

The suit alleged that by December 2008, Sterling had referred approximately 178 “outsider” investor accounts to Madoff. It also said that when Wilpon and his family also bought Nelson Doubleday’s 50 percent ownership of the Mets in 2002, Madoff declined a chance to invest in the team that he was offered by Sterling.

The lawsuit said cash from Madoff accounts, including fictitious profits, was used for team payroll, players’ deferred compensation and stadium operations. The suit has cast a cloud over the Mets ownership, which has said it’s exploring a partial sale of the team. But Wilpon and Katz denied Friday that the operation was ever dependent on Madoff.

“That is complete nonsense,” they said. “We have good, sound businesses that were successful years before we invested with Madoff, including both real estate and the New York Mets.”

Madoff, 72, is serving a 150-year sentence in a federal prison in North Carolina after admitting that he ran his scheme for at least two decades, using his investment advisory service to cheat individuals, charities, celebrities and institutional investors.

Losses are estimated at around $20 billion, making it the biggest investment fraud in U.S. history.

The lawsuit describes the Sterling Partners as “a team of sophisticated professionals who built a business empire spanning four major industries, including real estate, professional baseball and sports media, private equity and hedge funds.”

It says Sterling Partners “willfully disregarded any criticisms of Madoff and simply buried their heads in the sand” during a nearly quarter-century relationship in which it supported its substantial business empire with Madoff money and reaped the benefits of bogus profits.

The firm was “simply in too deep … to do anything but ignore the gathering clouds,” the lawsuit says. “In the face of the parade of red flags, the Sterling Partners chose to do nothing.”

Numerous financial industry professionals over the years warned Sterling about Madoff and speculated he was operating a fraud, including one Sterling consultant who advised Katz in 2003 that he “couldn’t make Bernie’s math work and something wasn’t right,” the court papers say.

The lawsuit says Sterling was on notice as early as 1991 that Madoff’s firm was audited by a three-person operation in Rockland County that consisted of a certified public accountant, a semiretired accountant and an assistant. In 1996, it says, multiple banks refused to serve as custodian of Sterling’s 401K plan because of concerns about Madoff’s lack of transparency and inability to provide daily account balance information.

At one point after several financial news publications raised questions about the Madoff business in May 2001, Sterling considering getting fraud insurance that would have included a Ponzi scheme but Sterling ultimately rejected the insurance because coverage limits meant most of their money was uninsurable, according to the court papers.

The lawsuit said Sterling’s Madoff accounts produced positive returns during the Black Monday stock market crash of 1987, the bursting of the dot-com bubble in 2000, the terrorist attacks of Sept. 11, 2001, and the recession and housing crisis of 2008.

“Remarkably, Sterling’s [Madoff] investments were effectively immune from any number of market catastrophes, enjoying steady rates of return even during events that otherwise devastated financial markets, ” the lawsuit says.

The Associated Press

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Bloomberg proposes changes to NYC pension system to save city from financial disaster

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New York’s Mayor Michael R. Bloomberg announced a proposal on Wednesday that would end some of the city’s most generous pension provisions for its workers and save billions of dollars in the process. He said unless there is aggressive pension reform, the current system will soon bankrupt the city.

Bloomberg, who until recently, was considered an ally of the unions, is now in the position of drawing their ire.

Vowing to save the city from bankruptcy, NYC Mayor Michael R. Bloomberg proposed controversial pension reform.

Some of the proposed changes include mandatory 10 years of employment before new hires are eligible for benefits– double the current number of years, and require them to be at least 65 years old before receiving benefits. Currently, workers can begin drawing benefits as early as age 57, and many cops and fire fighters receive full benefits after 20 years, no matter how old they are.

Another proposed change would prevent employees from being able to use overtime wages in determining the base for their retirement pay, a controversial and widespread abuse known as “pension spiking.” City managers routinely allow retiring workers to load up on overtime in their final year before retirement, often increasing their pension payments by over 50 percent.

All new city employees would be required to pay more of their own monies into their retirement accounts, and some existing employees, mostly police and firefighters would lose some existing benefits, namely a $12,000 annual stipend they receive in addition to their regular pension.

“This reflects the dire fiscal circumstances the city faces, the devastating impact of increasing pension costs and the desperate need for aggressive reforms,” said Marc La Vorgna, a mayoral spokesman told the New York Times.

The current move is an about-face for Bloomberg, who in the past has used generous pension benefits as a way to keep the city’s 300,000 workers happy and prevent them from striking at times of contract negotiations. As recently as 2008, Bloomberg helped push through a new teachers union contract that included a pension provision allowing them to retire five years earlier than before, with full retirement benefits.

Later that same year, as the financial crisis was in full swing and wages were stagnant throughout the country, Bloomberg gave the city’s largest municipal union back-to-back 4 percent raises, without any concessions on pension benefits.

If successful, the changes could immediately save the city at least $200 million per year, although far larger savings, in the billions of dollars would be further down the road.

One union official, angry over the proposals, called Bloomberg a “dictator.” Harry Nespoli, chairman of the Municipal Labor Committee, an umbrella group of unions, said that Bloomberg had “has set back labor relations 40 years.” Nespoli added “We’re fed up with this. He’s going to have a battle. We’re just not going to roll over.”

Teachers union chief, Michael Mulgrew, called the mayor “insane,” and said that Bloomberg “has just decided, I’m going to attack, attack, attack everybody.”

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N.Y and N.J. Port Authority paid $95.5 million for land rights, week before project halted

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The Port Authority of New York and New Jersey paid $95.5 million to lease land for the Hudson River tunnel project only one week before work on it was halted.  The payment was for a ten-year lease on a mostly vacant 2-acre parcel that officials say was needed for the tunnel entrance for the doomed ARC Tunnel commuter rail project.

The $8.7 billion public-works project was stopped by New Jersey Gov. Chris Christie on Sept. 10, after he determined the state could not take the risk that the project could be completed on budget, putting the state on the hook for potentially billions of dollars in cost overruns. A cost study on the project determined that with cost overruns, the price of the tunnel could potentially exceed $13 billion.

A month after the temporary halt, Christie, cancelled the project.

The lease deal, locking up rights to use the property, was signed on Sept. 3. The Port Authority told The Record newspaper it signed a preliminary contract for the site in October 2009. Port Authority officials said breaking the deal could have brought a possible lawsuit and substantial losses.

The property is owned by an investment group headed by Joseph B. Rose, a top administration official in the office of former New York Mayor Rudolph Giuliani. Rose served an eight-year term as the Chairman of the New York City Planning Commission. At the time, he was an outspoken critic of the Port Authority, claiming it was mismanaged and committed too many of its resources to New Jersey interests.

Richard Schwartz, a spokesman for the investment group, said they had planned to build a one-million square foot hotel on the property, but agreed to the Port Authority lease under threat of having the property taken by the agency through the power of eminent domain.

The parcel, known as the “Georgetown” property, was appraised two times at a value of $125 million. For the $95.5 million payment, the Port Authority received a surface easement for 10 years, which would enable it to relocate a ConEd yard that would have been closed by the construction. The payment also included rights to drill deep under the site.

The Port Authority said recently that it paid over $150 million to tie up several small parcels of land needed for the construction, and in total, spent about $600 million before the project was cancelled. It says it has been approached by developers interested in the Georgetown property, although it is doubtful that the monies could be recovered, since surface rights to the property expire in 10 years.

The Record

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Union flexes its muscles; stagehands at Lincoln Center make average $290,000 per year

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While most union workers might only dream of making six-figures per year, stagehands at New York’s Broadway theaters live the dream. Although their jobs are not highly skilled, and consist mainly of moving props, chairs, furniture and the like around a stage, they have the power and willingness to shut down any Broadway theater to get whatever they want come contract negotiation time.

Carnegie Hall, impressive-especially for the salaries of its stagehands.

One union worker, stagehand Dennis O’Connell, who is the props manager at Carnegie Hall, makes $422,599 per year—plus $107,445 in benefits. A New York Times reporter, Daniel J. Wakin, got the information on a 2007-2008 publicly-filed tax return of Carnegie Hall, which listed the theater’s six highest paid employees.

Besides the company’s chief executive, Clive Gillison, who made $946,581, the next five highest paid employees were all stagehands. The lowest-ranked member in the top five was electrician John Goodson, who made $327,257 plus $76,459 in benefits.

Although the stagehands at Carnegie Hall might be the best paid in town, the average pay of all the stagehands at nearby Lincoln Center, including salary and benefits, was $290,000.

The power to charge a business $300,000 to $500,000 for one laborer comes from Local 1, of the International Alliance of Theatrical and Stage Employees, which closed down 39 Broadway theaters in November 2007 for 19 days, causing tens of millions of dollars per week to be lost by theater owners, and the city.

So the next time you visit New York and wonder why all the theater tickets are $150 each or more, now you know at least part of the story.

The Washington Examiner

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Ex-car czar to pay $10 million settlement with N.Y. over bribes

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New York attorney general and soon-to-be governor, Andrew M. Cuomo, announced today a settlement with Steven L. Rattner, the Obama administrations former car-czar, over an investigation and charges that he engaged in a kickback scheme involving the New York Common Retirement Fund.

Rattner will pay a fine of $10 million fine and will be barred from doing business with any New York pension fund for five years. Sources said that Cuomo was previously seeking a $26 million penalty.

Rattner was accused of paying Hank Morris, an aide to former state comptroller Alan G. Hevesi, for his help in securing business from the $135 billion fund. Morris pleaded guilty earlier this month to providing illegal access to the fund.

Officials said that Morris also arranged for Rattner to funnel $50,000 in campaign contributions to Hevesi’s reelection campaign for state comptroller through third parties, to conceal the true identity of the donor. After making the illegal donations, Quadrangle’s state pension monies under management increased from $100 million to $150 million.

Cuomo also charged Rattner with providing special favors to the brother of a senior pension fund official. The brother, a Hollywood producer, was helped by Rattner in securing distribution of a low-budget film called Chooch, through a DVD company owned by Quadrangle. Rattner also helped the brother secure a deal with IFC, a cable outlet partly owned by Quadrangle. Rattner was also a member of IFC’s board of directors.

“I am gratified that we have been able to reach an agreement in this case, as it resolves the last major action of our multi-year investigation,” Cuomo said in a statement. “The state pension fund is a valuable asset held in trust for retirees and supported by taxpayers. Through the many cases, pleas and settlements in this investigation, I believe we have been able to help restore and protect the integrity of the state pension fund.”

Rattner, who had been openly critical of Cuomo over the charges, said “I am pleased to have reached a settlement with the New York attorney general’s office, which allows me to put this matter behind me. I apologize if during the course of this process there is anything I did that may have made reaching this agreement more difficult. I respect the work of the attorney general and his staff to ensure that the New York State Common Retirement Fund operates properly and in the best interests of New Yorkers.”

Before founding Quadrangle, Rattner was a reporter for The New York Times and an investment banker for Lazard in New York. When he was appointed to the auto czar post in February 2009, he listed his net worth on federal disclosure firms as between $188 million and $608 million.

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