Wednesday, September 19, 2012

The Culture of Cheating: does Yonkers trial show Forest City as “good corporate citizen”? Prosecutors say developer avoided "significant concessions"

For Bruce Ratner, Brooklyn’s most powerful developer, March 9, 2012 represented a coronation of sorts: he appeared for the first time as the guest of elite interviewer Charlie Rose.

The host was ready to fawn over several Forest City Ratner-built projects: the MetroTech office complex in Brooklyn; the residential tower 8 Spruce Street in Lower Manhattan (marketed modestly as “New York By Gehry”), and the in-construction Barclays Center basketball arena in Brooklyn, slated to house the NBA’s Nets this fall.

Ratner, beaming at the softball questions floated by the host, suggested that, unlike himself, most other developers eschew “civic” development but “look at more, I think, the economics."

To those who know Ratner’s controversial Atlantic Yards project, which includes the arena and 16 planned towers, the developer’s claim was a hoot. Why else would Brooklyn not yet have seen the much-promised Atlantic Yards affordable housing (and most of the jobs) if not for “the economics”?

The Ridge Hill case

The coronation would have been further complicated had Rose noticed a federal corruption trial ongoing in Lower Manhattan, during which Forest City Ratner was seeing its business practices under a microscope.

No, the defendants did not include Forest City Ratner, an arm of the Cleveland-based Forest City Enterprises (FCE) which specializes in tricky mixed-use projects that require public-private partnerships.

However, in its desperate effort to get its 81-acre Ridge Hill retail/residential project past the Yonkers City Council, Ratner’s firm had rewarded a fixer--a clear case of looking at “the economics.” FCE and its subsidiaries are no stranger to aggressive lobbying and strategic spending, but this time Forest City Ratner seemed to cross a line--an ethical one, if not a legal one.

Shortly before the trial, the two key Forest City executives expected to testify, government relations chief Bruce Bender and his deputy Scott Cantone, let it be known they were leaving to form a consulting company.

Was this a purge, or perhaps damage control? Given the duo’s subsequent testimony--how Forest City hired a Yonkers operative for a no-show job after he helped get a City Council Member to flip her vote on Ridge Hill--their departure didn’t look routine.

Rarely does the development dance get described in such excruciating detail, complete with profane email messages and hold-your-noise hiring. This was the Culture of Cheating--no, not for Atlantic Yards, but with the same developer and many of the same players.

As the trial proceeded, Crain’s New York Business columnist Greg David, generally a friend to developers, commented that Forest City Ratner must be relieved that its “See no evil, hear no evil” posture in Yonkers got so little attention.

About six weeks after the trial began, on March 29, the fixer, Republican Zehy Jereis, and the Council Member, Democrat Sandy Annabi, were convicted on all counts, including the giving and receiving of corrupt payments and, in the case of a second project, extortion. Whatever the verdict, as David suggested, Forest City Ratner’s reputation had already been tainted--and far more than when the indictment emerged in January 2010.

Prosecutors: Forest City got a deal

For more, see the full article, which includes the news that federal prosecutors, in post-trial motions filed last month, make it clear that Forest City, though not criminally liable, benefited hugely from Annabi's vote--and her failure to disclose her conflict of interest.

They wrote:
[C]onsider the reaction of the public, the press, and Annabi's Council colleagues if the full truth that came out at trial had been known before Annabi switched her vote on the Ridge Hill Project in the summer of 2006. Had the public known that Jereis had been giving Annabi hundreds of thousands of dollars over the course of several years, that Jereis and Annabi had a meeting with the Ridge Hill developers before the vote, and that Forest City Ratner promised Jereis a $60,000 no-show consulting contract if Annabi flipped her vote from no to yes, there would very likely have been a clamor for Annabi to be recused from the July 11, 2006 vote on the Ridge Hill Project. That would have meant the vote would have been only 4-2 in favor, which would not satisfy the five-vote supermajority requirement. The largest development project in the history of New York's fourth largest city might never have been built. Or the developer might have had to make significant concessions.
(Emphasis added)

The full article...

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