AUGUST 09, 2016
De Blasio, Clinton cronies are carving up the city. Right, developer Bruce Ratner
By Micah Morrison
In New York City, the controversy plagued Atlantic Yards development appears to be heading for trouble again. That could create problems for Mayor Bill de Blasio and presidential hopeful Hillary Clinton. Allies of both Democrats have profited mightily from the project.
For over a decade, Atlantic Yards has been at the center of heated disputes over power, profit and privilege in New York. Does the site serve the needs of the taxpayers who financed its development? Or is it primarily a giant boondoggle generating torrents of cash for well-connected insiders?
The 22-acre, $5 billion Brooklyn site of planned residential, commercial and park space is home to the Barclays Center sports arena and sixteen high-rise buildings in various stages of development. According to recent news reports from Moscow, Barclays Center owner Mikhail Prokhorov is under Kremlin pressure to sell all his Russian assets. Prokhorov’s U.S. holdings could be next. Prokhorov’s fall would reverberate from Moscow to New York, where U.S. Attorney Preet Bharara is making development deals a centerpiece of a sweeping anti-corruption crusade.
New Yorkers have been here before.
“I seen my opportunities and I took ’em,” the plain-speaking Tammany Hall politician George Washington Plunkitt said in 1905. The corrupt Tammany political machine dominated New York City politics for a century, its chicanery extending into every corner of civic life. Bribes, kickbacks, fraud, extortion and graft were the order of the day. Today, New York is witnessing the birth of a new Tammany Hall. Plunkitt’s heirs are seeing their opportunities and taking them on a colossal scale.
The center of the new Tammany is Mayor de Blasio’s City Hall. But de Blasio is no Boss Tweed, old Tammany’s criminal genius. De Blasio has emerged as more pawn than prince of the city: insecure, in over his head, buffeted by moneyed players he cannot seem to resist and presiding over accelerating pay-to-play scandals that have cast a pall of political death over his administration.
Atlantic Yards offers a case study of how the new Tammany system has evolved. It’s local: extending from dealmakers to a cadre de Blasio calls his “agents of the city” and to Albany’s notorious “three men in a room.” It’s international: the deals stretch from New York and Washington to Russia and China. And it’s sophisticated, powered by the global economy, the influential New York real estate industry, and non-profit entities manipulated for personal and political gain.
But the central scam of the new Tammany system would not be unfamiliar to old Tammany’s Plunkitt: public money for private profit. Plunkitt called it “honest graft”—gaming the system to the benefit of the powerful and well-connected, with crumbs for the common folk.
Atlantic Yards, Brooklyn, NY. Artist’s rendering.
DEMOCRATIC PARTY TIES
Real estate developer and Democratic Party heavyweight Bruce Ratner is the central figure in the battles over Atlantic Yards. Smart, tough and tireless, Ratner is a master of honest graft. He has been charged with no crimes, but has repeatedly courted controversy with unfulfilled promises of public benefits, multi-million-dollar paydays, and links to crooked politicians and their enablers.
Ratner has close ties to de Blasio and Clinton. Hillary Clinton’s presidential campaign headquarters is in a Ratner building in Brooklyn. Ratner and de Blasio lobbied hard to bring this year’s Democratic National Convention to the Barclays Center. De Blasio was an important early supporter of Ratner’s Atlantic Yards bid. A longtime donor to Democrats, Ratner backed de Blasio’s mayoral campaign. Ratner figured in the 1996 Bill Clinton campaign finance scandal as a guest in the Lincoln Bedroom and at a White House “coffee” event. Harold Ickes—the powerful Clinton adviser and lobbyist identified by federal prosecutors as “the Svengali” behind the campaign-finance scandal—is an influential mentor to de Blasio.
The City of New York is Ratner’s biggest tenant, leasing over one million square feet of office space, according to federal filings. The federal government is his fourth largest tenant.
The go-between for de Blasio and Ratner is Jonathan Rosen, a political consultant and a central figure in the mayor’s “agents of the city” controversy. In May, de Blasio rejected a media request for email correspondence between the mayor and Rosen, as well as four others associated with his political campaigns. Four of the five now work as consultants or lobbyists with business before the city. The fifth, Patrick Gaspard, is the U.S. ambassador to South Africa and a former political operative at the powerful Service Employees International Union Local 1199—the only major union group to back de Blasio’s 2013 mayoral bid.
According to published reports, Rosen is under investigation by Bharara and Manhattan DA Cy Vance in connection with de Blasio fund raising and the mayor’s non-profit organization, Campaign for One New York. Rosen’s firm, BerlinRosen, was paid about $700,000 by de Blasio-related entities. Rosen also has been on Bruce Ratner’s payroll for years as a spokesman and adviser for Atlantic Yards. In 2012, Crain’s New York Business noted that Rosen was a “top strategist” for Ratner.
De Blasio is fighting disclosure of the activities of the five men, advancing the novel claim that they are “agents of the city” whose communications with the mayor should be private. Judicial Watch has filed Freedom of Information Law requests for the Rosen and Gaspard emails, but has been rebuffed in its requests for timely production of the material. “We have appealed the decision of the mayor’s office and will take it to court if necessary,” said Judicial Watch Director of Litigation Paul Orfanedes. “Clearly in this case, the public has a right to know.”
Former NY Assembly Speaker Sheldon Silver, U.S. Attorney Preet Bharara
THREE MEN IN A ROOM
Rosen, the strategist for Ratner and de Blasio, also was a top adviser to a major figure in the annals of New York corruption: Assembly Speaker Sheldon Silver. Silver played a key role in Atlantic Yards. He was one of the notorious “three men in a room”—the governor, speaker, and senate majority leader—wielding power in Albany.
“If you’re one of the three men in a room, and you have all the power and you always have and everyone knows it,” U.S. Attorney Bharara said following Silver’s arrest on corruption charges, “you don’t tolerate dissent because you don’t have to. You don’t allow debate because you don’t have to.”
In New York, “three men in a room” is a kind of shorthand for corruption in the state capital. But in the case of Atlantic Yards and other high-dollar dealings of state government, it’s a fact: three men in a room exercise complete control over billions of dollars of state funding.
The lucrative lever of their power—a cash cow for the new Tammany system—is called the Public Authorities Control Board. According to court testimony, it has no staff, no offices, and has approved “billions of dollars of bond sales.” In a 2006 meeting that lasted just five minutes, the PACB approved Ratner’s Atlantic Yards proposal, despite mounting public opposition to the project.
The price tag: $4 billion.
PACB approval opened the door for Ratner to receive taxpayer-backed benefits and financing. The benefits included an immediate cash injection of $100 million for “new infrastructure” such as “streets and sewers,” according to testimony by a state budget official in a lawsuit, and a later $511 million sale of tax-free bonds.
In a 2006 letter to the three men—Silver, then-Senate Majority Leader Joseph Bruno and then-Gov. George Pataki—State Comptroller Alan Hevesi warned that the PACB had authorized “nearly $9.5 billion in State-supported financing during a less than 30 day period” and was on track to spend another $5.6 billion in the days ahead.
Of the three men and the state comptroller, only Pataki escaped a corruption indictment. Silver and Hevesi went to jail. Bruno was charged and later cleared.
Silver, the pivotal PACB vote on Atlantic Yards, had a close relationship with Ratner. After PACB approval, Ratner contributed $58,000 to a Silver-controlled committee and helped raise $1 million for the Metropolitan Council on Jewish Poverty, led by a close Silver ally, William Rapfogel. Rapfogel was later convicted of stealing more than $7 million from the Metropolitan Council.
The alliance between Ratner, Rapfogel and Silver was a family affair. Rapfogel’s wife was Silver’s chief of staff. Rapfogel’s son was a lawyer for Ratner.
Ratner crossed paths with other corrupt politicians as well. A Ratner lobbyist, Richard Lipsky, pleaded guilty to funneling over $250,000 to a powerful state senator from Brooklyn, Carl Kruger, in exchange for political favors. And in Yonkers, two political figures were convicted in a bribery case involving a changed vote to support a Ratner development, Ridge Hill.
Ratner and his Forest City companies were not charged with any wrongdoing in the cases. Controlling interest in Ridge Hill later was sold to an Australian company and Ratner was awarded an $11 million “development fee” for the project by the Forest City board of directors
EMINENT DOMAIN, PRIVATE GAIN
In 2009, Ratner won a court battle to use Albany’s eminent domain power to seize control of the Atlantic Yards site, promising thousands of good jobs and affordable housing units. Ratner’s opponents argued that he was in it for the money and that there would be little public benefit—one of the standards for an eminent domain seizure—from the project. Civic groups protesting the development were steamrolled and homeowners were forced out.
Ratner received state-backed financing and $726 million in “special government benefits”—your tax dollars at work—to help finance the Barclays Center portion of site, according to an analysis by the city’s Independent Budget Office.
The benefits included “direct contributions of cash, capital investment and property; access to tax-exempt financing; exemptions from property, sales, and mortgage taxes, and below market sale” of Metropolitan Transportation Authority land, the IBO report said.
Despite all that, Barclays looked like a loser for the city. The arena would “cost the city nearly $40 million more in spending” than it would generate in tax revenues, the report said.
In 2010, Ratner began to cash out. He sold a major stake in Barclays and the Brooklyn Nets basketball team to the Russian mogul, Prokhorov, for $223 million. Last year, he transferred the rest of his share for an additional $285 million.
Breaking ground at China-controlled “Pacific Park.” Center, Bruce Ratner, Bill de Blasio; right, Greenland CEO Zhang Yuliang
THE CHINA CONNECTION
Meanwhile, China had come calling.
In 2014, Ratner sold an ownership stake in Atlantic Yards (excluding the Barclays site) for $208 million. The buyer: Shanghai-based Greenland Holdings, a company controlled by the Chinese government.
In a move of Orwellian audacity, Ratner and his new Chinese partners promptly changed the name of the site from Atlantic Yards to Pacific Park. Greenland “now reaps the benefit of the subsidies, tax breaks and cheap land that Forest City Ratner wangled for the project in the 2000s,” wrote Norman Oder, a Brooklyn journalist who chronicles the project on the watchdog blog, Atlantic Yards/Pacific Park Report.
Among the properties now under the control of China: 664 Pacific Street, which is slated to include a new seven-floor New York City public school.
At a groundbreaking for a new 298-unit “Pacific Park” building touted by the mayor’s office as “100% affordable housing,” de Blasio declared that the development “offers the chance to have a huge number of affordable units that people in this community can live in.”
The New York Daily News reported that rent for most of the units, which would be offered through a lottery, would run between $2,500 and $3,500 a month. “Only in New York,” the paper wryly noted, “could you win an ‘affordable housing’ lottery and still wind up paying almost $3,500 in rent.”
VISAS FOR SALE
Ratner and his Chinese partners have raised hundreds of millions of dollars through the controversial EB-5 U.S. visa program. Under EB-5, a foreigner putting up $500,000 becomes eligible for a green card to live in the U.S. The purpose of the program is job creation. Each investment of $500,000 in a so-called “targeted employment area,” according to government estimates, creates ten full-time jobs.
Sales of EB-5 green cards in China were brisk.
“Project developers have raised some $577 million at below-market interest rates,” noted Atlantic Yards watchdog Norman Oder. China “is profiting by marketing a scarce U.S. public resource—green card slots under the EB-5 program—to its own citizens.”
Ratner and his Russian partner Prokhorov are also in the EB-5 business on Long Island, where they control the rebuilding of Nassau Coliseum—another project mired in Tammany-style controversies. “$90 million in low-interest [EB-5] loans,” Oder reports, are “expected from immigrant investors more concerned with green cards than any financial return.”
A report by the Government Accountability Office warned that the EB-5 program created “unique fraud and national security risks.” Sales of the visa have tripled in recent years, creating “additional opportunities for fraud,” the report noted. Sources of funds for the visas could come through the “drug trade, human trafficking, or other criminal activities.”
And those ten-jobs-per-green-card the program is supposed to create? Reporting of economic benefits of the program “is not valid and reliable,” the GAO warned, “because it may overstate or understate results.”
Ratner did not respond to a Judicial Watch request for comment about his financial positions in Atlantic Yards, his relationship with political figures charged in corruption probes, Rosen, Prokhorov, Greenland Holdings and the EB-5 program.
BHARARA IN THE CROSSHAIRS
Ratner’s promises of public benefits from the Atlantic Yards project—the basis for much of the city, state and federal bounty bestowed on him—have gone mostly unfulfilled. There are few good jobs at Atlantic Yards. “Jobs were overpromised at the start and since then have been oversold,” said blogger Oder.
Affordable housing has not materialized. “There’s a huge disconnect between current construction and the promises de Blasio and Forest City have long made for affordable units,” Oder said. “Two ‘100% affordable’ buildings are skewed to middle-income households, with more than 60% of the apartments going to households earning six figures.”
But Bruce Ratner has done okay. His company is worth $10 billion. His personal net worth has been estimated at $400 million. After leveraging more than $1 billion in taxpayer assistance, he walked away from responsibility for Atlantic Yards, transferring control to a Russian mogul and the Chinese government.
Ratner’s friend and tenant Hillary Clinton appears to be on her way to the presidency, so she has done okay too. Knowing her will be helpful when all those federal office space leases come up. Bill de Blasio has done okay too. As mayor, he presides over an $82 billion budget: plenty of money to be made there in office leases and a favorable City Hall attitude to new development projects. De Blasio’s agents of the city have reaped millions in consulting contracts from organizations eager to do business with the city. The real estate business is doing great—profits are up, big time.
Public money, private profit, promises unkept: in that sense, the old Tammany system is not much different from the new one. It took reformers decades to crush old Tammany. In April, in a sharp warning to de Blasio and Governor Andrew Cuomo, U.S. Attorney Bharara told Common Cause New York that he would “keep looking hard at corruption,” not just in the legislative branch, but in the “executive branch too, both in city and in state government.”
He’d better look fast. U.S. Attorneys serve at the pleasure of the president and Bharara has made powerful enemies. When the new president takes office in January, the number one wish of the new Tammany Hall will be to get rid of the troublesome reformer.
Micah Morrison is chief investigative reporter for the watchdog group Judicial Watch.