Skip to main content

Ridge Hill trial: Forest City execs pushed payment for no-show job despite internal resistance; prosecution's case complicated by Bender's agreement that developer convinced Annabi to switch vote

In the third and likely final day in which Forest City Ratner (ex-)employees testified in the Yonkers corruption case, a federal jury yesterday heard more evidence that the developer had behaved in a questionable manner.

After all, testimony yesterday indicated that Forest City executives had no problem with Zehy Jereis's seemingly no-show job and, even though he hadn't submitted required monthly reports and a lower-level employee had raised a red flag, two of the firm's top government relations executives, Bruce Bender and Scott Cantone, ordered that he be paid $15,000.

But the developer's not on trial, and the jury might now be wondering why Jereis and Sandy Annabi face corruption charges, while Forest City, the beneficiary of Annabi's changed vote to green-light the Ridge Hill project, is unscathed. (Jurors of course can be instructed to address only the culpability of the defendants, not any other parties.)

Helping prosecution or defense?

Also, though a prosecution witness, Bender, who recently left Forest City, at one point complicated the prosecution's theory of the case. He corroborated Annabi's defense that she changed her vote not because of a stream of payments she was receiving from Jereis but because she was convinced on the merits.

Jereis's defense is that he spent money--$174,000 over some years--on Annabi because he was infatuated with her. Annabi, who denies a romantic relationship, claims she changed her vote on Ridge Hill and the other project involved in the trial, Longfellow, because developers made concessions. However, Forest City's concessions on Ridge Hill were deemed minor.

Immunity? Or just rough and tumble

Neither Bender nor Cantone said they were testifying under immunity, or were described as doing so. Either that information has not yet emerged, or prosecutors were confident there was no inkling of illegal acts.

If so, perhaps defense lawyers have no reason to portray Forest City and its employees as criminal, rather than as people enmeshed in the rough and tumble of politics, which includes patronage spending.

With the Longfellow project, there appears to be a clear quid pro quo, with Jereis funneling money he got from the developers through an intermediary, Anthony Mangone, who has already pleaded guilty.

The Ridge Hill case is far more murky. The $15,000 Jereis got from Forest City came after the fact, and might be seen--from the perspective of prosecutors--as a replenishment of the funding stream he maintained with Annabi. That funding encompassed far more than the money Jereis got in connection with the two projects.

With the Longfellow aspect of the case, defense lawyers are challenging witnesses who are cooperating after pleading guilding, including developer Franco Milio, who testified yesterday, according to the Journal News.

Somewhat similarly, defense lawyers may suggest that, if Forest City did nothing illegal, neither did their clients. As I wrote 2/13/12, Jereis’s lawyer, Anthony Siano, stated in a memo: “In effect, the developers of Ridge Hill appear to form no part of the substantive violations against defendant Jereis. This appears to be so despite the recitations as to Ridge Hill in the conspiracy count... the Indictment does not allege who, if anyone, made corrupt payments to Jereis and does not even identify whether any such corrupt payments were bribes or extortion payments."

Political assistance?

After lengthy testimony by Cantone on Feb. 24 and both Cantone and Bender on Feb. 27, yesterday morning, what was mainly at issue was what work Jereis did when he was hired at a $5,000 a month consultant for one year not long after Annabi changed her vote.

Assistant U.S. Attorney Perry Carbone pointed to suggestions raised the previous day that, even after Annabi's vote, Jereis might have helped Forest City with Ridge Hill opponent Paul Feiner, Supervisor of nearby Greenburgh.

Bender said no, given that Jereis was a Yonkers Republican and Feiner a Greenburgh Democrat: "That just doesn't mix."

What Jereis did

Carbone, querying Bender in a style of studied calm, tried to clear up some lingering issues.

What had Bender told the grand jury in 2008 about how instrumental Jereis's role had been in getting Ridge Hill approved?

"I thought it was very helpful," Bender replied.

Who'd pay the fees?

Also at issue is whether Annabi knew Jereis ever asked for anything of value. According to previous testimony, Forest City executives said she had not been copied on emails in which he asked Forest City for a job.

In a 6/14/06 meeting, when Annabi learned she'd have to postpone a planned vacation to be present for the 7/11/06 Council vote, who, asked Carbone, raised the issue of whether Forest City might pay the late fee or penalty on her ticket?

Bender said he didn't know if it was Jereis or Annabi.

(Last week, Cantone testified that it was Jereis who asked, but that Forest City, citing "ethical and legal concerns," said no. This was communicated to Jereis who said "he'll figure it out, maybe he'll pay it himself," according to Cantone.)

"If it was Mr. Jereis, was she present?"

"I believe so," replied Bender.

"What did you say in response?"

"We could not do it."

Later, William Aronwald, Annabi's attorney, asked how much the cancellation fee was.

Bender said he didn't know.

"Certainly not in the tens of thousands of dollars," Aronwald followed up.

"I wouldn't know," Bender responded.

"Did Mr. Jereis or Ms. Annabi say, That's it, forget about it, you're not getting her vote?" Aronwald asked.

"No," responded Bender.

Aronwald then brought up another reported payment, which might be seen as a cleaner way to provide value to an elected official.

"Are you familiar with a company known as Westchester Invaders?" Aronwald asked. "Isn't it true Forest City Ratner made a contribution of $10,000 to Westchester Invaders at Council Member [Patricia] McDow's or [FCR lobbyist] Melvin Lowe's request?"

"I can't recall," Bender said.

Westchester Invaders is a drum and bugle corps that McDow has saluted, but I couldn't find corroborating evidence of a Forest City Ratner contribution. Then again, it would not be out of line with company practices in Brooklyn.

Why did Annabi flip?

Siano, Jereis's attorney, reminded Bender of his 2008 grand jury testimony that he believed that he, not any gift from Jereis, had persuaded Annabi to change her vote.

Bender said it was a combination: "It was a collective effort by a lot of people."

"Your team persuaded her?" Siano asked.

"Yes."

"You believe that as you sit in the witness box today?" Siano pressed on.

"Yes," replied Bender, in a subdued manner.

That complicated the prosecution's case.

Prosecutor Carbone popped back up to remind jurors of the prosecution's theory. What else, he asked Bender, had the witness said to the grand jury?

"That Mr. Jereis was advocating for the project at the same time," he said.

But "advocating for the project" is lobbying, and lobbying isn't out of bounds.

Swagerty enters

If Bender and Cantone came off as no strangers to rough and tumble politics, the next witness, former Forest City employee John Swagerty, was more of a Boy Scout, a 30something man with a chipper, straightforward manner and the internal peace of having tried to be something of an internal whistleblower.

Swagerty worked at Forest City about eight-and-a-half years, rising to VP in retail development, before leaving a year ago to work for Acadia Real Estate Trust.

On Ridge Hill, he oversaw the environmental review and worked on the zoning change sought, reporting to Executive VP Richard Pesin. Swagerty had no interaction with government officials, given that Bender and Cantone "wanted to make sure they were the only ones."

Swagerty was in charge of the budget, and the ensuring that consultants hired were placed under the appropriate budget lines.

Under questioning from Assistant U.S. Attorney Jason Halperin, Swagerty described the concessions granted Annabi and in the previous few months. The additional $10 million promised in taxes was about 1.5% of the total project cost.

As for changes regarding traffic or environmental issues sought previously by Annabi, in concert with other project opponents, there were none.

"Junior varsity" invoices

On 9/19/06, according to Cantone's testimony last week, Jereis was sent a one-year, $5,000-a-month consulting agreement, which--for reasons yet unexplained--he didn't return until 10/10/06. It was backdated to 8/1/06, for reasons yet unexplained.

On 10/13/06, shortly after Forest City Ratner formally hired Jereis and backdated the contract, Swagerty received and reviewed an invoice from Jereis's firm, ZJ Enterprises, purportedly covering work in August and September.

The invoice simply listed the months and fee per month, with no information about tasks Jereis accomplished. "It struck me as a little unprofessional," Swagerty testified. "I think I used the word JV: junior varsity."

Did he pass it on? "Actually, I kicked it back to Scott Cantone and told him I needed to see more information to send it to the accounting department," Swagerty replied.

Prosecutors did not ask what happened next.

Getting Jereis paid

Under questioning by defense attorney Siano, Swagerty agreed that revised invoices did come back, though he didn't know who revised them. (Their content was not described.) By December 2006, the total value of the invoice had reached $15,000, covering three months.

On 12/6/06, Swagerty received an email message from Debbie Venezia, then the administrative assistant for Bender and Cantone. It was sent with the notation "High Importance."

"We need to get Zehy Jereis paid ASAP," she wrote. "Can you please expedite? It is extremely important that we get a check."

Swagerty signed off and sent it to accounting.

Jereis's reports and an empty Exxon station

As part of his contract, Jereis was also supposed to send in reports on his work hunting for potential retail sites, but did not do so until March 2007, when news of the federal investigation surfaced.

Upon Forest City's receipt of Jereis's monthly reports, Swagerty spent three days, at the instruction of executives Pesin and Bender, visiting 13 of the 18 properties Jereis listed, taking pictures and compiling information. Perhaps five were residential properties, thus unsuited for Forest City's retail plans, he said.

Overall, Swagerty said, the sites on the list were not appropriate for Forest City. "We undertake big projects, like Ridge Hill," stated Swagerty, as if still in the developer's employ.

In the report, as shown to the jury, his boss Pesin had marked only one of the 13 properties with the word "pursue," indicating the company's potential interest.

Even that choice, to Swagerty, seemed out of line, since Forest City never developed sites like that empty Exxon station at 365 Kimball Avenue. (Image of 365 Kimball via Google Street View)

Is the site the size of a gas station typical for Forest City?

No, responded Swagerty.

Were any steps taken to pursue the site?

"I don't think any steps were taken," Swagerty responded.

The jury might have been left with the impression that Pesin, who didn't testify, was trying to indicate that Jereis had done some valid work on his consulting contract.

On cross-examination, Siano asked, "Did anyone tell you Mr. Jereis had been told to find supermarkets and empty lots?"

The question was dismissed as hearsay.

"Other than the contract, did you have any information as to the instructions given Mr. Jereis?" Siano asked.

"No," responded Swagerty.

FC Acquisitions

When Bender was on the stand, Siano asked him about the Forest City entity under which Jereis was hired: "Are you familier with FC Acquistion Associates LLC?"

"Not really," Bender replied.

(Screenshot from NYS Division of Corporations)

Had he ever seen that firm's name on any company document?

No, acknowledged Bender, after first saying it wasn't his function at the company.

On redirect, Carbone got Bender to explain that a large corporation often sets up sub-entities.

Swagerty, under questioning by Siano, agreed he contacted Cantone because he had never heard of FC Acquisition. "His response was, 'Put it in retail hunting,'" Siano related, drawing Swagerty's confirmation.

The rest of the testimony: Longfellow

After Swagerty left, the trial shifted to discussion of the Longfellow project, with developer Franco Milio on the stand, as reported by the Journal News:
A Yonkers businessman testified Tuesday that his lawyer persuaded him in 2006 to pay $30,000 so then-Councilman Sandy Annabi would stop opposing his land-swap deal and let his development of the Longfellow School property proceed.
Franco Milio told a federal jury that his father, Antonio, ended up paying the money to lawyer Anthony Mangone after Mangone introduced him to Annabi’s cousin, Zehy Jereis, and then told Milio the payment was “to get the approval done.”

Comments

Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…