The City Council’s Big Slush Hush

Thanks to the bogus-funding scandal haunting the City Council, we now know the best way to hide a multimillion-dollar scam in a $60 billion budget: Right in plain sight.

Speaker Christine Quinn swears she had no idea that sham nonprofit groups got some of the largest budget allocations in an effort to tuck away money for her own later discretionary spending. Ditto Mayor Bloomberg, who snapped nasty with reporters when they pressed him about why his office never noticed anything. Even City Comptroller Bill Thompson, whose job it is to spot these things and who, like Quinn, would like to step into Bloomberg’s shoes in a couple of years, somehow missed the scheme entirely.

All of which doesn’t inspire much confidence in the city’s fiscal leadership. For that matter, it doesn’t say a hell of a lot about the rest of us would-be watchdogs either. Every summer, the city’s budget documents stack up like bricks in City Hall, available for perusal by any citizen with time on his hands and a high tolerance for agate-sized print. You can only hope that someone might have stumbled upon six-figure allocations to the likes of “Isoquant for Life” or “Coalition of Informed Individuals”—two of the more brazenly fake names employed to hide the dough. No such luck. Which is why the collective embarrassment on this one spares no one.

“I feel so foolish. I missed it too,” said one of the council’s brightest members last week. Welcome to the club.

But what’s also likely is that some of the key players here are shading the truth more than a little. They’re counting on the public and the press to be unable to penetrate a maze of opaque budget procedures that have long served political convenience while mocking taxpayers.

Is it really likely that Bloomberg’s Office of Management and Budget, whose staff includes top former officials from the council’s own finance division, never knew that phony groups were being used to stash cash between budgets for the use of council bigwigs? Or that the comptroller’s office, confronted with requests to register large contracts that didn’t appear in the annual approved budget, never checked to confirm whether funds had been legally appropriated for them?

Or that Quinn, since becoming speaker in January 2006, could really have approved some $4.7 million in extra, post-budget awards to nonprofit groups—many with important political ties—without asking tough questions as to exactly where and how the extra cash was being squirreled away?

Last Friday, Quinn weathered a grueling, hour-long press conference in the Red Room in the council’s wing of City Hall. The session was her idea, and its aim was to tamp down growing cynicism about the episode by announcing a round of new reforms to the way her office doles out money. Quinn was surrounded by a loyal cadre of council members, plus two leaders of city good-government organizations who gave their blessings to her ideas.

But the nagging question in the room was “Why now?” As in: If Quinn really did first get the jarring news that fictitious groups had been listed by her staff in the budget “late last fall” (she couldn’t, or wouldn’t, pin down an actual date), why hadn’t she launched her clean-up campaign back then? Why had she only told the federal and city investigators whose request for council records had sparked the discovery of the phantom budget “holding codes,” while keeping mum about it with her fellow council members? Why had she waited until reporter Frankie Edozien’s exposé hit the front page of the New York Post this month?

Every time reporters asked, Quinn ducked for cover.

“We have given a great deal of information out about this topic and answered, I think, an extraordinary amount of questions on it,” she said. “Not every question we can answer right now because of the ongoing investigation.”

She used the word “obviously” a lot, even though there’s little that’s obvious about the whole affair.

“Obviously, I was deeply troubled by what was going on,” she said. “Obviously, what happened last week added urgency to the issue.”

No doubt. But what is painfully obvious is that by keeping quiet about this whopper for so long, Quinn dug herself a deep hole. Every new detail that slips out makes it deeper. For instance, it wasn’t until the Friday press conference that Quinn acknowledged that the lawyers who first told her about the fake organizations were those from Sullivan & Cromwell, the white-collar crime specialists she hired when investigators first started asking for records. When the story first broke, Quinn said “the council’s attorneys made this discovery,” leaving the impression that her own staff had told her about the practice. Then there’s her insistence that during meetings last May and June—back before she allegedly knew about the fictitious groups—she had ordered her staff to stop using any kind of secret holding codes. But when the press asked for proof, the only evidence offered was a written statement from Chuck Meara, Quinn’s chief of staff.

Meara’s declaration, noted one council wag, reads like a hostage statement: “In the spring of 2007,” the aide wrote, “I attended several meetings with Council Speaker Quinn, members of the City Council Finance Division, and other senior staff regarding the city budget. At one of those meetings I clearly recall Speaker Quinn stating that we will no longer use holding codes to keep funds in reserve.”

Meara is a holdover from Quinn’s predecessor, ex-Speaker Gifford Miller, who presided over the council’s budget when the use of secret holding codes began exploding, records show. Miller has so far avoided answering questions, and Meara has yet to say what he personally knew about the schemes.

And then there was Quinn’s sorry effort to shift the blame, telling reporters on the day the story broke that “the two highest-ranking members of our Finance Division no longer work for the City Council.”

Under the bus went ex–finance director Mike Keough, whom Quinn herself had installed in his job. With him went ex-deputy Staci Emanuel, one of the council’s most popular staffers. Most people had a hard time believing the two aides would ever have gone against a direct order. Worse, however, Quinn flunked the stand-up test for bosses. A few days later, she corrected course, insisting that “the buck stops with me.”

But at least Quinn has tried to bring some transparency to an area that council members have collectively tried to keep shrouded for years. While the council has long been ridiculed as a legislative lightweight, its real clout has always been its control over immense pots of discretionary money that can be doled out to favored friends and allies. The full amount is still a moving target, as Quinn proved last Friday when she couldn’t come up with a total figure when asked. But it seems to be some $350 million on the expense side, and more in the capital budget.

State legislators in Albany have long taken the biggest media bruising for their own slush-fund abuses, but the council’s most politically potent members appear to far outweigh them in pork-barrel heft. The grants and contracts they dispense are easily converted into political backing and campaign contributions. And since so many members of the term-limited council spend much of their time these days raising money to run for some other job, the least taxpayers are owed at this point is clear information about who’s giving what pork to whom.