Wednesday, October 15, 2014

Former ESDC head "Ambassador" Gargano, "classy political opportunist," now a leader of EB-5 firm promoting Atlantic Yards investment

Update: see how U.S. Immigration Fund is pitching "Atlantic Yards III" in China.

The "Ambassador" is back, and the circularity is stunning.
Charles Gargano, official handout
photo from U.S. Immigration Fund

Charles Gargano, the chairman of the Empire State Development Corporation when Atlantic Yards was proposed and first approved, now has a job promoting Atlantic Yards and other EB-5 projects to green card-seeking immigrant investors in China.

Gargano, a "classy political opportunist" who was embarrassingly evasive about the project in TV and radio interviews, is now part of a scheme that has several dubious beneficiaries.

He's now Executive Director of the U.S. Immigration Fund, which despite its official-sounding name and logo (below), is a private company, based in Palm Beach, FL, which has gone through the requisite hoops to market such investments.

He's helping companies like Greenland Forest City Partners--the new developer of Atlantic Yards/Pacific Park, 70% controlled by the Shanghai city government-owned Greenland Group--gain below-market loans thanks to a loosely regulated federal program. 

Not only is he helping Forest City increase profits by exploiting a public asset--green cards--that is too easily provided by the federal government, he's helping a Chinese government make money by marketing a previous quota of U.S. residency slots to Chinese citizens.

And he's helping the U.S. Immigration fund, whose leader, Nicholas Mastroianni II, Fortune just reported, "has a long history of legal problems, failed ventures, and unpaid debts—which have continued even as his professional fortunes have turned sharply upward—leaving a legacy of conflicts, judgments, and entanglements."

The deceptions at the core of EB-5 

In that program, immigrant investors and their families get green cards in exchange for a $500,000 investment that purportedly creates ten jobs.

However, the jobs are calculated on paper, not a head count, and the job creation can be calculated based on the entire project cost, not merely the immigrant investors' share. 

So no new jobs need actually be created, and it's often "margin for the developer," as one analyst has said. It's an astonishing benefit to entrepreneurs and developers, as the federal government essentially gives away a precious public resource rather than ensure that the resource reaps public benefits.

The alchemy is such that Andrew Kimball, when he headed the Brooklyn Navy Yard, the first local recipient of EB-5 funds, gave a revealing quote to Crain' s in 2012, seemingly incredulous at the opportunity to leverage public assets for private gain.

“At first, we were sort of scratching our heads, thinking, is this real?” Kimball said. “The next thing we knew, we were falling out of our chairs.”

As Dartmouth's John Vogel wrote 2/22/13 in U.S. News:
Question No. 4: Are there good alternative uses for the EB-5 money? One of the oddities about the EB-5 program is that the U.S. government is giving out the green cards, but the entrepreneur who puts together the investment gets the money. This scheme seems inefficient and open to corruption. If our government really believes that it is a good idea to sell green cards, maybe we should drop the pretense that this is a job creation program. It might be more efficient to have the money go directly to the U.S. Treasury and reduce the deficit by billions of dollars a year. In fact, the U.S. government could auction off these green cards and perhaps raise even more money.
Enter the Ambassador

For Gargano, a longtime operator, there's surely a reward, and the job surely is distant enough from his government service to pass muster with any conflict-of-interest rules.

Promoted as "Ambassador Gargano" in the press release below, he served as Ambassador to the Republic of Trinidad and Tobago from 1988 to 1991, a notable political appointment as thank-you for his prodigious fund-raising on behalf of Republican candidates.

It's part of a pattern in which former government officials offer a pretense of governmental presence, support, and sanction for private companies pitching EB-5, thus reassuring Chinese investors. 

(Former Gov. David Paterson took a job briefly with an EB-5 firm. Sen. John Sampson, while in office also took a purported volunteer role with an EB-5 firm, but was dropped after he was indicted.)

In March, when Gargano's appointment was announced, photo distributed (above right)  shows him posed in front of an American flag.

The U.S. Immigration Fund is led by Mastroianni, a construction executive and developer in Florida who has expanded to organize and promote EB-5 projects, and reap a rich array of fees.'

It has pitched the second round of EB-5 fundraising for Atlantic Yards, for $249 million, and now the third round of EB-5 fundraising, for $100 million. (Another middleman company handled the $228 million first round.)

Gargano promotes 101 TriBeCa
Gargano appeared at a 10/10/14 presentation in Shanghai promoting the latest EB-5 fundraising for Atlantic Yards. 

Earlier this year, he pitched another project, 101 TriBeCa, a 63-story, 433,800 square-foot luxury residential condominium tower marketed by the U.S. Immigration Fund

In June, he promoted another Fund project, known as 701TSQ, a 39-story hotel/retail project in Times Square

One news article/press release about the latter project even used an October 1995 photo of Gargano with Gov. George Pataki and others to promote the Ambassador's standing.

It's hard to imagine that any of these projects are truly targeted at employing people in areas of high unemployment, which is required by statute when immigrant investors invest $500,000, rather than $1 million. 

After all, nearly every EB-5 project competes for investors by ensuring they are in such Targeted Employment Areas, often through creative gerrymandering that somehow connects a wealthy area like Midtown Manhattan, Lower Manhattan, or the Atlantic Yards site with poorer districts. And that's OK to federal regulators.

Gargano's background

“I like Charlie. The guy has taste,” said attorney Edward Hayes in 1999. “Many people think of Charlie Gargano as a shady political opportunist. He is not. He is a classy political opportunist.”

As the Times reported 9/3/95:
Mr. Gargano is the colorful, sometimes controversial, immensely successful chief fund-raiser who collected $14.5 million to finance Mr. Pataki's upset victory last fall and who continues to be chairman of $1,000-a-plate Republican fund-raising events.
Mr. Gargano is also the Commissioner of the State Department of Economic Development, a job he has held since February that gives him enormous leeway in handing out millions of dollars worth of contracts to businesses across New York.
At times these last seven months, it has been hard to know which Charles Gargano was sitting at the table -- the one asking state business leaders for money or the one giving them the taxpayers' money.
The latter, most likely, was in evidence in 2006 when, dissembling about eminent domain, Gargano was said by WNYC's Brian Lehrer, who typically avoids harsh judgments about Atlantic Yards, to have displayed "classic political evasiveness."

In March 2007, the Village Voice's Tom Robbins found "several cases in which Gargano had the public pay his fare and ignored his own agency's stiff standards on expense reimbursement."
The press release, in full, issued 3/26/14:
U.S. Immigration Fund Appoints Ambassador Charles Gargano as Executive Director
NEW YORK, NY--(Marketwired - March 26, 2014) - U.S. Immigration Fund, a national leader in EB-5 financing, appointed Ambassador Charles Gargano as Executive Director of the organization March 1, 2014. In this role, Gargano will oversee the future development and success of the U.S. Immigration Fund portfolio of USCIS-approved Regional Centers.
Charles Gargano has spent more than 20 years in public service at the State and Federal level, serving Presidents Ronald Reagan and George Bush, and New York Governor George Pataki. His governmental roles have included:
Deputy Administrator of the Federal Urban Mass Transportation Administration in 1981;
Ambassador to the Republic of Trinidad and Tobago from 1988 to 1991;
Chairman and CEO of the Empire State Development Corporation and Vice Chairman of the Port Authority of New York and New Jersey from 1995 to 2007.

Prior to entering public service, Mr. Gargano, a Professional Engineer, was a partner in Posillico Construction and Engineering Corporation for 21 years.
As Executive Director of U.S. Immigration Fund, Gargano will be responsible for business development and relationship management, project negotiation and operational oversight.
"I am confident that Charles Gargano will be an undeniable asset to our company," explains Nick Mastroianni, President of U.S. Immigration Fund. "His successful career in both the public and private sectors is indicative of his drive to form reliable, long-lasting partnerships and dedication to improving not only New York City, but the U.S. as a whole, through well-planned growth and development."
Mastroianni continues, "We look forward to a long and prosperous future with Mr. Gargano."
Mr. Gargano will primarily represent U.S. Immigration Fund's New York Regional Center, a Manhattan-based operation that will facilitate over $1 billion in EB-5 financing through 2014.
About U.S. Immigration Fund
U.S. Immigration Fund provides worthwhile opportunities for foreign investors and their families to obtain permanent U.S. residency through the EB-5 Visa Program. U.S. Immigration Fund has partnered with investors and leading developers to facilitate more than $3.5 billion in real estate development and more than $900 million in EB-5 financing, which will create more than 27,000 U.S. jobs.

1 comment:

  1. Anonymous12:20 AM

    When you go to the Brooklyn Navy Yards Museum they have a wall of the history of corruption of the Navy Yard. It's amazing how history repeats itself when it comes to political favors, corrupt politicians and bribes.. Empire State Development could do the same thing on a wall at Barclay Center.