Wednesday, February 10, 2010

The CBA angle to the Seabrook indictment, Liu's effort to reform CBAs, and the lingering clouds over the AY CBA

It is no coincidence that today, a day after news of the indictment of Bronx City Council Member Larry Seabrook for money laundering, extortion and fraud, City Comptroller John Liu issued a statement calling Community Benefits Agreements an "embarrassment" and urging more standards.

While a contract associated with the Yankee Stadium CBA was but a part of the Seabrook indictment (press release), it was another questionable episode in the saga of CBAs, which Mayor Mike Bloomberg--once an enthusiastic witness to the Atlantic Yards CBA--now calls "extortion."

And given the allegedly criminal behavior, it raises a question as to why a convicted criminal ($500,000 in fraudulent billing), Darryl Greene--the subject of huge controversy regarding the deal for an Aqueduct video casino--has played a key role in the Atlantic Yards CBA.

The indictment

The New York Times headlined the news Councilman Charged With Money Laundering:
Most of the charges in the 13-count federal indictment revolve around Mr. Seabrook’s use of Council discretionary funds, known as earmarks, to finance a string of nonprofit groups that city and federal authorities say ultimately did little for the communities they were supposed to aid.

...Mr. Seabrook, 58, and others were able to do this, prosecutors contend, in part by repeatedly inflating expense claims to the city on the part of the nonprofit groups, including rent costs.
The New York Post, seizing on an allegedly doctored receipt from $7 to $177, headlined its article Bagel, borrow & 'steal' for pol.

The CBA angle

According to the indictment, Seabrook lobbied the Yankees to award the Yankee Stadium boiler contract to a Bronx boiler manufacturer which was not among the four previously-identified bidders.

A developer serving as a representative of the Yankees asked the team for authorization to award the boiler subcontract to Seabrook's choice, noting that there was a $13,000 premium because the firm was "a Local Business Enterprise and heavily supported by a local politician."

The Contractor paid the Bronx Boiler Manufacturer in excess of $283,000 for the boiler subcontract. Seabrook allegedly got $50,000.

With the Atlantic Yards CBA, Greene remains in charge of a Minority/Women/Local Business Enterprise database, according to the web site of his firm, the Darman Group.

Who dropped the dime on Seabrook?

The Times reported on its CityRoom blog:
The Yankee’s spokeswoman, Ms. [Alice] McGillion, noted that the boiler contract was “of a type that had been encouraged by the Community Benefits Agreement and was performed satisfactorily.”

She said that when the baseball team learned of the situation, they asked the independent construction monitor they had hired to oversee the project, Edwin H. Stier of Thacher Associates, to look into the matter and he confirmed it.
I'm not sure what the construction monitor confirmed: that the contract was performed satisfactory? The Yankees cooperated with the U.S. Attorney on the investigation, but it doesn't look like the Yankees dropped the dime on Seabrook.

That apparently came from another angle, as the Times reported:
In June, federal investigators issued subpoenas to landlords who leased space to Mr. Seabrook and several nonprofit groups closely linked to him after an article in The New York Times detailed the inflated rent payments and the use of nonprofit money to pay salary and fees to Mr. Seabrook’s family members.
The Liu statement

Liu issued a statement:
“Community Benefit Agreements have become commonplace whenever private developers seek public assistance, ranging in form from tax subsidies and no-bid contracting to zoning changes and invocation of eminent domain. In the absence of standards, however, these agreements will become more problematic and ultimately irrelevant.

“From Atlantic Yards to Yankee Stadium to the Columbia University expansion, the public has seen a string of broken promises to communities and questionable involvement by some government officials. Furthermore, an additional layer of unpredictability confronts developers when they engage in private negotiations over benefits associated with their projects. In fact, studies have singled out New York City’s community benefit agreements as examples of what not to do.

“It is time for this embarrassment to end. In the coming months, I’ll establish standards for community benefit agreements that are accountable, transparent, consistent and inclusive. To that end, I will form a task force including business, labor and community representatives that will thoroughly examine the issue of community benefit agreements and propose best practices. It is simply common sense to have clear standards that ensure benefits for the public when private developers receive benefits from the public. I look forward to working with the Mayor and the City Council to implement a new approach that will place our city at the forefront of community engagement in economic development projects.”
Liu has a lot to investigate, including the enforceability of CBAs, their scope, and their representativeness.

Clouds over the AY CBA

Most of the signatories of the AY Community Benefits Agreement did not exist before the project arose, and all are funded by the developer, Forest City Ratner's MaryAnne Gilmartin finally acknowledged last July.

Most of the groups had been closemouthed. In March 2009, I asked Ben Beach, staff attorney at the Community Benefits Law Center, the legal program of the Partnership for Working Families, if it was appropriate for CBA signatories to accept funding from the developer and, if they do, if they should disclose it.

“I’m generally not in favor of signatories accepting money,” Beach said, saying it “undercuts the integrity of the deal.” However, if they do get money from the developer, yes, they should disclose it, he said.

Similarly, John Goldstein, National Program Director of The Partnership for Working Families, has said, “As a matter of principle, groups in our network don’t take money from developers. We want to avoid any appearance of a conflict of interest.”

Forest City Ratner, which signed the Affordable Housing Memorandum of Understanding with New York ACORN, bailed out national ACORN with a $1.5 million loan/grant.

Delia Hunley-Adossa, chairperson of the Atlantic Yards CBA, says a significant chunk of the $400,000 her dubious nonprofit, Brooklyn Endeavor Experience (BEE), has raised has gone to rat and rodent abatement and air conditioner installation at her building, First Atlantic Terminal.

Given that such tasks are not really part of BEE's mandate, wouldn't those contracts be worth a closer look?

An RFP for an Independent Compliance Monitor was issued by Greene's Darman Group in March 2007, nearly three years ago, but no such position was ever announced.

The AY warning

Bettina Damiani of Good Jobs New York offered testimony at a 5/26/05 City Council meeting that was ignored at the time. She raised questions about transparency:
The negotiations surrounding the development of the BAY project have been marked by secrecy, with elected officials providing privileged access to one developer for the site. Rather than working with local stakeholders to create a vision for community-driven development and then issuing a Request For Proposals (RFP) to locate the developer that can best meet those community needs, the city instead chose to pursue one idea – that of a sports arena coupled with a prime residential real estate opportunity – that fails to take many local concerns into account and partnering with one development company, Forest City Ratner Company (FCRC), to put that idea into action. Unsurprisingly, this process has contributed to a fragmentation of community responses, as some groups have been able to work with the “designated developer” to advance their concerns while others have not.
And she raised a red flag about the CBA:
As a sponsored project of Good Jobs First, which provided support for the CBAs negotiated in California and continues to act as a clearinghouse for information on CBAs, we feel it is important to draw the Council’s attention to several major differences between CBAs as they have been used in other parts of the country and the series of negotiations that FCRC is calling a CBA. Perhaps the most striking is that elsewhere CBAs are negotiated by one broad coalition of groups that would otherwise oppose a project, a coalition that includes labor and community organizations representing a variety of interests. The coalition hammers out its points of unity in advance and then each member holds out on settling on its particular issue until the issues of the other members are addressed. This way, the bargaining power of each group is used for the benefit of the coalition as a whole. In the BAY case, several groups, all of which have publicly supported the project already, have each engaged in what seem to be separate negotiations on particular issues.

...We do not mean to say that negotiations on affordable housing and local hiring are without value. Housing and jobs are among the most important reasons to pursue development projects of any kind. However, to use the “CBA” model set forth by the landmark STAPLES Center agreement in Los Angeles for a series of non-binding side agreements between already-supportive community groups and a developer can only set a low bar for future attempts to negotiate for broad-based benefits from major development projects. Without broad, cross-cutting organizing, such “CBAs” can become a mechanism for dividing the community rather than uniting it, and devolve into a mere publicity tool for developers of controversial projects.
The bigger picture

Lobbyist Richard Lipsky suggested that Manhattan District Attorney's investigation of Mayor Mike Bloomberg's $750,000 personal campaign contribution to the state Independence Party was bigger news than the Seabrook indictment:
It's time that our local media understand that the living large style of personal and charitable spending-self aggrandizement at its finest-that has characterized the Bloomberg era is as big a threat to democratic process as the sleazy activities of, say, a council member such as Larry Seabrook who was accused yesterday of money laundering. In fact, it is actually greater since it transcends one individual and tends to thoroughly corrupt the entire system.

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