Skip to main content

Board members of ESDC, other authorities, would finally become fiduciaries if reform bill passes

Somewhat buried in a New York Times Empire Zone column on Monday, headlined Stance on Same-Sex Marriage Brings Surprises for Paterson, was an item, under the sub-headline "Seeking Oversight for Agencies," indicating the potential passage of “the first meaningful oversight of the Metropolitan Transportation Authority, the New York State Thruway Authority, the Empire State Development Corporation [ESDC] and a multitude of other state and local authorities.”

Notably, it would require a fiduciary duty of authority board members--a duty of care arguably lacking in the ESDC's treatment of the Atlantic Yards project.

Such proposed reforms have been under discussion for years, and the current proposal draws on both Assembly and Senate bills and the report of a special commission convened by then-Gov. George Pataki. As the Times reported:
The broad outlines of the proposal would overhaul an existing budget office for authorities and transform it into an entity with teeth, as well as give the state comptroller broader power to reject contracts. Board members of authorities would also be considered fiduciaries under the plan, with responsibilities that would make them legally responsible to uphold the interests of state taxpayers and potentially subject to legal recourse if they did not.

Negotiations among the Assembly, Senate, and Governor’s office are ongoing, with the goal of reaching a resolution before the legislative session ends next Monday, Emma Furman, Deputy Chief of Staff for Assemblyman Richard Brodsky, told me. “We are working hard to try to get it done.” Brodsky is sponsor of Assembly Bill A9296A.

Bill details

According to a memorandum in support of the bill, it would not only establish and fund the Independent Office of Public Authority Accountability, it would require study of additional potential reforms, mandate referral of suspected wrong-doing to entities qualified to conduct investigations, require the State Comptroller to review and approve certain public authority contracts, prohibit state public authorities from forming subsidiaries without legislative approval, except under defined circumstances, and require all state authorities to include contract participation by minority-and women-owned businesses.

The fiduciary duty & AY

The plan to establish a statutory fiduciary duty owed by public authority board members to the authorities they serve and to require such members to acknowledge their fiduciary duties upon taking office, while too late, most likely, for the Atlantic Yards project, suggests that future iterations of the ESDC might not approve a project so cavalierly.

Did ESDC board members, in their brief 12/8/06 approval of the project bother to check:
  • if the arena financing plan was legitimate or a took advantage of a "loophole"?
  • if there would be enough affordable housing financing to get the project done anywhere close to the “anticipated” ten-year timetable?
  • if that ten-year timetable would be enforced in future ESDC contracts or whether the agency would give the developer 12+ years to build Phase 1 and no deadline for Phase 2?
These are all questions that might be pursued if the Assembly Committee on Corporations, Authorities, and Commissions, chaired by Brodsky, turns its direct attention to Atlantic Yards.

What a fiduciary duty means

The bill would amend the Public Authorities Law to “establish a statutory fiduciary duty on the part of authority board members to perform their functions in good faith and with the degree of independence, diligence, care and skill which ordinarily prudent persons would exercise under similar circumstances, and in all ways consistent with their fiduciary duties of loyalty and due care to the organization and obedience to the authority's corporate purposes

Corporate governance expert Ira Millstein, who chaired Pataki’s Commission on Public Authority Reform, testified before a joint Assembly/Senate hearing 3/7/07. “You need to have directors of these authorities which understand that they have a job to do,” Millstein said, according to a transcript of the hearing. “[W]e've talked to a lot of these directors in the past, and most of them did not, and still don't understand that they have a job. “

“This is a real job," he continued. "Now how do you tell people that they have a real job? Well, you tell them that they have a fiduciary duty. This is a common, well-known expression which everybody in the world understands. You have a fiduciary duty to do the job that you've been appointed to do. And that means you have the duty of loyalty, you have the duty of care, you have a duty to carry out the mission, and it's a duty. It's not something that you have because you think it's a good thing to do. There is a requirement that you do that.”

He noted that corporate directors have fiduciary duties enforced by stockholder derivative suits, while public authorities have gotten into trouble only when “something blatantly went wrong” and the issue was covered by the press.

The penalty is shame

Brooklyn Assemblyman Hakeem Jeffries, a member of the committee, asked what kind of penalties authority board members might face, given that authorities are not corporations. Millstein suggested that civil penalties were not necessary, given that the monetary penalties corporate directors might pay are nearly always covered insurance and thus not a deterrent.

The real deterrent, he suggested, was shame: “Nobody likes to read about themselves in the newspapers of having been on a board that went to sleep. “

And that’s why the press should have paid more attention to the ESDC’s approval of Atlantic Yards.

Implications for AY eminent domain case?

Regarding the ESDC’s performance, the plaintiffs in the Atlantic Yards eminent domain case have argued, in appeal papers before the U.S. Supreme Court,
that the case differs from one in Washington, DC, involving the City Council, a legislative body:
As the court observed, legislators enjoy both statutory and common lawprivileges and immunities from disclosing their subjective motives and intentions in considering and/or acting on legislation.
Here there is no such privilege or immunity and thus no reason for hesitancy. Ratner’s and Pataki’s decision to condemn respondents’ properties was rubber-stamped by the ESDC, an unelected, quasi-governmental corporation. Indeed, the ESDC is so removed from state government that the Eleventh Amendment does not protect it from suit.


That may not be the same as lacking a fiduciary duty, but strikes me as a parallel issue. The suit argues that the ESDC has not been very accountable. So does the pending reform legislation.

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

No, security guards can't ban photos. Questions remain about visibility of ID/sticker system.

The bi-monthly Atlantic Yards/Pacific Park Community Update meeting June 14, held at 55 Hanson Place, addressed multiple issues, including delays in the project, a new detente with project neighbors,concerns about traffic congestion, upcoming sewer work and demolitions, and an explanation of how high winds caused debris to fly off the under-construction 38 Sixth Avenue building. I'll have more coverage.
Security issues came up several times at the meeting.
Wayne Bailey, a resident who regularly takes photos and videos (that I often use) of construction/operations issues that impact residents, asked representatives of Tishman Construction if the security guard at the sites they're building works for them.
After Tishman Senior VP Eric Reid said yes, Bailey asked why a guard told him not to shoot video of the site, even though he was on a public street.

"I will address it with principals for that security firm," Reid said.
Forest City Ratner executive Ashley Cotton, the …

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlantic Yards/Pacific Park graphic: what's built/what might be coming (post-dated pinned post)

Click on graphic to enlarge. This is post-dated to stay at the top of the blog. It will be updated as announced configurations change and buildings launch. The August 2014 tentative configurations proposed by developer Greenland Forest City Partners will change, and the project is already well behind that tentative timetable.


Not quite the pattern: Greenland selling development sites, not completed condos

Real Estate Weekly, reporting on trends in Chinese investment in New York City, on 11/18/15 quoted Jim Costello, a senior vice president at research firm Real Capital Analytics:
“They’re typically building high-end condos, build it and sell it. Capital return is in a few years. That’s something that is ingrained in the companies that have been coming here because that’s how they’ve grown in the last 35 years. It’s always been a development game for them. So they’re just repeating their business model here,” he said. When I read that last November, I didn't think it necessarily applied to Atlantic Yards/Pacific Park, now 70% owned (outside of the Barclays Center and B2 modular apartment tower), by the Greenland Group, owned significantly by the Shanghai government.
A majority of the buildings will be rentals, some 100% market, some 100% affordable, and several--the last several built--are supposed to be 50% market/50% subsidized. (See tentative timetable below.)

Selling development …

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…