Skip to main content

New video exposes the Culture of Cheating: Markowitz admits Brooklyn is not "1000 percent behind Atlantic Yards," as he told Chinese investors, but asserts, jocularly, it's "980 percent"

Remember how Brooklyn Borough President Marty Markowitz made a video in the fall of 2010, claiming that Brooklyn was "1000 percent behind Atlantic Yards?"

Such misleading support helped Forest City Ratner raise some $228 million in cheap capital from immigrant investors via the federal government's EB-5 program, an effort I've been dissecting for two years under the rubric "Anatomy of a Shady Deal."

Well, I finally got Markowitz to explain himself--sort of--and he admitted he was wrong, though not by much.

Valuable help

Markowitz's shilling, as well as cheerleading from city and state officials, helped the developer save tens of millions of dollars from 456 investors, given that the would-be immigrants, who park $500,000 in a purported job-creating enterprise in exchange for green cards for themselves and their families, care little about earning interest.

The middleman--in this case a federally-authorized investment pool called the New York City Regional Center--loaned the money to Forest City at below-market interest, and gets  to keeps the spread.

The loser? The public, since the intent of the law is to create new jobs, not simply to increase the profits of a developer by allowing it to substitute cheaper capital for existing capital, as seems to be the case here.

Thus Markowitz's role also highlights my new, ongoing Culture of Cheating series that aims to provide a framework for viewing the Atlantic Yards saga.

The original video

Markowitz was invited to China by Forest City Ratner, mindful that high net worth individuals there, from the country that supplies a large majority of immigrant investors, feel more confident about EB-5 project if they seem to have the participation and backing of government officials, even if that backing--as in this case--is only rhetorical.

He didn't go, likely because he was concerned about bad publicity, both about his role in the project and, more likely, his frequent overseas trips. Markowitz appeared in a video produced by the New York City Regional Center, standing before official flags and, even though he and the borough had no official role in the financing for the project, made preposterous claims.

"The largest company in Brooklyn is Forest City and I can assure you that their reputation is unbelievably reliable," he declared. "They're a great company to work with; they've worked very closely with government. The most important thing: they make a promise, they keep it." (Actually, promises of housing, jobs, and more have not been kept.)

Then he claimed Brooklyn backed Atlantic Yards "1000 percent."

(More on the video here, including why the subtitles are in Korean.)

Questioning Markowitz

On Tuesday, 11/29/11, after the MetroTech tree lighting ceremony, I caught up with Markowitz, with cameraman Jonathan Barkey in tow. (I'm not a big fan of such ambush tactics, but Markowitz has previously avoided questions about this topic and he's pretty much always on.)

"Is Brooklyn 1000 percent behind Atlantic Yards?" I asked.

"No, not 1000 percent," Markowitz responded, conceding, "I mean, I may have said that."

"That was my question," I countered.

"I would say it's 980 percent," said Markowitz, who was in a festive mood.

A better explanation might be, as Markowitz said upon holding a borough-wide "Thank You" in the wake of his 2001 election, "The days of being staid are over. I have no shame, it's OK."

(Video by Jonathan Barkey)

How much support?

Actually, the latest poll at the time, from Crain's New York Business in 2006, said 60% of Brooklynites favored Atlantic Yards, significantly because of promised jobs and affordable housing--none of which have been delivered at the rates promised.

At the tree lighting ceremony, when Markowitz talked up the Nets (see 3:25 of the video), there was no discernible response from the office workers and parents in attendance.

That said, Brooklyn's big enough to generate a vocal and significant fraction of support for the team and arena, especially since the team's rapid revamp this past July, even if it does not mean--as the New York Times conclusorily suggested--that "Brooklyn seems ready to adopt the Nets."

That doesn't mean widespread support for Atlantic Yards, however.

"No corruption"

"And I must tell you," Markowitz continued. "Once you get away from your--the area that you focus on, once you get past that, the people of Brooklyn celebrate this, It's going to be a wonderful page-turner in a positive way and, overwhelmingly, the people that support Atlantic Yards, including me, there was no corruption, no payoffs, no matter how much there are folks there that think that there are deep-seated whatever, it was based on the fact that we truly believe it's a good, positive thing for Brooklyn."

No findings of corruption, but, as I've argued, a "culture of cheating."

But the whiff of corruption (as noted by New York Times columnist Michael Powell) wafts toward Forest City Ratner, which is unindicted but mentioned in indictments of ally state Senator Carl Kruger and lobbyist Richard Lipsky, and of its lobbyist in Westchester's Ridge Hill case.

And the process behind Atlantic Yards suggests crony capitalism, such as anointing a developer public property before a Request for Proposals was issued, or hiring consultant AKRF to conduct a study with the express aim of finding blight, as opposed to "neighborhood conditions."

Again, while there's no official corruption, Markowitz's solicitation of corporate funding for his charities allows him to raise more money from such important players in Brooklyn than he could through the campaign financed system. (His largest contributor? Forest City Ratner.)

"That's my personality"

"Why'd you say 1000 percent, why'd you make that video?" I asked.

"Y'know why, because that's my personality, and you've got yours and I've got mine," Markowitz replied. " And I like to--I'm very [humorous*]. So that's the way I am."
(*I couldn't quite get the word Markowitz was going for--it sounded closest to "humorous," but it's not clear.)

"Fair enough," I said, encouraging him, though it's really not fair at all. It was not the time for an extended ethical debate, but "that's the way I am" is not exactly a defense for lying to potential investors.

(Neither is there much of an explanation beyond "That's the way I am" for his wife Jamie, as the Post reported, sticking her tongue out at a neighborhood activist in Coney Island.)

"Sometimes I'll say a million percent," Markowitz continued, jocularly. "I'm surprised I didn't say a million. I made a mistake there. We look at this differently..."

Having it both ways

Markowitz's explanation recalled a statement he made to the New York Daily News in 2002, when he got in hot water over saying he'd move a portrait of "old white guys" like George Washington: "I have to weigh my words a lot more carefully. [When] I was a state senator nobody ever listened to me."

He's been trying to have it both ways ever since--it's his personality to be a cheerful booster, but he also has responsibilities to honest and fair government.

As former Chief of Staff Greg Atkins said in a deposition, "When Marty hired me, he--the words he used [were], 'I don't need anybody to do the shtick I do, that I need someone to run the borough.'"

In this case, shtick was used to mislead investors who, not knowing much about Brooklyn, might have been inclined to believe Markowitz.


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…