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Al D’Amato: Hopelessly Corrupt

Start a War? Violate a Constitutional Privilege? Spur Economic Disaster?
For Al D’Amato, Nothing’s Too Much for a Big Donor. 

One more sleaze story that puts Al D’Amato in bed with a contributor is like one more sex story about Ted Kennedy, in or out of bed. A decade of endless revelation has made New York’s two-term junior senator the Madonna of corrupt coupling. But since he is saluted as Senator Pothole as often as he is derided as Senator Shakedown, all that the electorate is left with is the perception that at least the state has a feisty senator who never fails to shake the pot. With the election less than a week away, despite almost a dozen years of saturation tawdriness, Al D’Amato’s most spectac­ular senatorial achievement is that he has somehow man­aged to immunize himself from ethics charges, at least in certain regions of the public mind, by making new sagas of his duplicity so “hopelessly” redundant that few readers have the patience to wade through them again.

Many of the millions of New Yorkers who will vote again for him next week will do so knowing he is a con man. You can see them holding up their hands when they are ap­proached by reporters and insisting that they don’t want “to hear about the past.” They know he is taking care of himself — horse-trading with every special interest imagin­able to pay for the $21 million worth of televised lies that have been protecting his Senate seat since 1981. But as long as he convinces these voters that he might also be taking care of them free of charge, they will tolerate his bartered service.

D’Amato’s campaigns are seen as raffles with enough prizes for everyone who plays to win a little something. Sure, those who buy a block of tickets get a Washington wallet-full, but ordinary voters out in Buffalo or Melville think they own a reassuring piece of him themselves, even if all they get is a promised tax break or a bone tossed to a personal bias. He will never be so lofty they can’t visualize him coming to their house for dinner, and bringing an expensive dessert. If he is Jesse James, it is not their bank deposits he is stealing.

Inside this review of D’Amato’s life and times are three new Fonz fables that show just how far he is willing to go for the ticket buyers who can afford the wallet-full. For friend and financier Donald Trump, he was willing to violate the constitution by volunteering privileged informa­tion on the witness stand. For Drexel-Burnham, he was just as prepared to submarine legislation that, had he pushed it, might have restricted junk bond influence on S&L col­lapses and hostile corporate takeovers. The story also re­veals D’Amato’s shocking effort to manipulate the Manhat­tan U.S. Attorney’s office in ways that benefitted his Drexel donors.

The third episode in this trilogy of a contributor-con­scious career exposes D’Amato as a senator whose attitudes about the Noriega government shifted with those of a longtime donor, even to the point of becoming an advance man for an invasion that would ultimately secure his client company’s oil pipeline interests.

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Of course, it’s a given that D’Amato be­lieves in nothing. Though it has somehow passed unnoticed all these years, even his personal life is a fraud. As soon as he won his 1980 Senate race, just before he as­sumed office two months later, he separat­ed from Penny, his wife of many years. Twelve years later he is still separated, yet they have never divorced. In the meantime he has dated half of Manhattan and Wash­ington, demonstrating an ironic fondness for former and current prosecutors, yet maintaining the political sanctity of his Catholic marriage, a presumed prerequisite for reelection in a decidedly Catholic state. While other Catholic politicians with way­ward views but less wayward lives must keep a wary distance from the unpredict­ably disapproving cardinal, tuxedoed Al D’Amato is welcome at the Al Smith dinner or at O’Connor’s hospital bedside after­ward, photographed on his way to this cor­poral act of mercy by attending news cam­eras and allowed by a tolerant cardinal to wrap himself around a church pillar. Per­haps O’Connor thinks that Al, too, is a celibate.

The senator’s technical avoidance of the sinful stain of divorce, as well as his possible pillow talk with a top organized crime investigator, might ordinarily be fodder for the New York Post; but in recent years, it has been owned by the senator’s longtime finance chair, Peter Kalikow. It would not be too hard for the Post to source the story, since D’Amato began using his friend Kali­kow’s Fifth Avenue apartment as his legal address when he left his wife all those years ago, even sometimes visiting the develop­er’s penthouse for a change of clothes.

Consistent with this counterfeit life, D’Amato has, in the final weeks of what may be his final campaign, shed a “principled” po­sition a day, transforming himself into a Clinton Republican, redefining his abortion position, embracing gays, waffling on plans to punish the welfare pregnant. His com­mercials have been such transparent ho­kum — ranging from the ridiculous misuse of Benito Mussolini, Geraldine Ferraro, and 26-year-old assembly votes by oppo­nent Bob Abrams — that D’Amato almost seems to be winking at the voters, offering up openly banal explanations so they can justify their otherwise indefensible urge to support him. This campaign of high-priced deceit has been such an outrage because D’Amato knows he is not just running for reelection; he is running for his life, pain­fully aware that a Justice Department liberated by a Democratic administration, with federal prosecutors in New York nominated by two Democratic senators, might not be as forgiving as those who’ve been in charge of the constant probes of him that have occurred in recent years.

While D’Amato may still be able to draw on this cynical grassroots acceptance and win, he knows now that a consensus has finally coalesced against him at the elite levels of New York politics. When Newsday and The New York Times brilliantly as­sailed him in same-day endorsements of Abrams last week, he officially became an outcast, revered only by the “he’s-never-­been-charged-with-a-crime” Post. Even when he extended his hand for one final dance with his old partner Mario Cuomo, the governor slapped him in the face, ap­parently well aware that too many people were watching to resume their once mutual­ly soothing tango. As the Times, which had endorsed D’ Amato last time, put it about the senator’s vice, enough was finally enough.

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Mike Armstrong, the savvy and loyal D’Amato lawyer and confidant, reminded me last week that the ethics cloud over D’Amato was first floated by the Voice during his bitterly reminiscent 1980 campaign. But when Jack Newfield, Joe Conason, and I finished that four-part series, we sadly came to realize that we’d actually helped him win his narrow victory. The grave charges we launched — all based on his prior career as a Nassau County official with a penchant for plunder — created such a stir that we’d go to an Alphonse press conference and the cameras would surround us. The D’Amatos, with brother Armand playing an aggressive role in the publicity war, successfully positioned themselves as the targets of the far-left, progay, anti-Italian Voice and rode the hard truth of our charges to triumph. (Then, as now, D’Amato declined to talk to the Voice.)

I remember the Fonz’s father, Armand D’Amato Sr., whom we unveiled as a dou­ble-dipper on public payrolls who collected exorbitant insurance brokerage fees from the county through his son, chasing our car down an Island Park street, shaking his fist at us. I remember our discovery during the series that D’Amato had hired a private investigator who’d once worked for Colom­bo capo Sonny Francese to tail us.

But mostly, I remember the salty taste in our mouths at the end, disappointed that we had been portrayed as mere partisans, though our portrait of the Nassau GOP machine was a carbon copy of our earlier work on the Brooklyn Democratic organization.

Since then, the breaking stories about Alfonse, published by every newspaper but the Post, have come nonstop. He is the only elected official in the state who’s been the recipient of three sets of illegal contributions, all of them earned by public perfor­mance on behalf of the compromising do­nors — $30,000 from Wedtech (“the most corrupt little company in America,” ac­cording to the subtitle of one book); $10,000 from Unisys, the defense contrac­tor whose payments to brother Armand led to his current indictment; and $32,000 from a group of Puerto Rican HUD devel­opers, who are also the subject of a pending criminal case.

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D’Amato is the only senator in America who has acknowledged having conversa­tions on behalf of two mobsters with a United States Attorney, contacting Rudy Giuliani in one instance to “warn” him that “lawyers” thought he might be “embarrassed” over the possible loss of a racke­teering and murder case against boss of bosses, Paul Castellano. Just as unique was D’Amato’s appearance as a character wit­ness for mob-tied disco owner Phil Basile, whom the senator kissed on both cheeks in the courtroom after proclaiming him “a man of honor and truth.” D’Amato rents his office to this day — paying the highest congressional rent in America and far more than the market rate in the building — from a landlord who was involved in a parking lot deal with convicted felon Basile (both Basile and the building’s owner, who have contributed thousands of dollars to D’A­mato, have also been represented by broth­er Armand).

Of course he has also distinguished himself before the Senate Ethics Committee, which found barely a year ago that he “con­ducted the business of his office in an im­proper and inappropriate manner” by let­ting his brother “systematically misuse” it for “personal gain,” writing a letter for Unisys on the senator’s stationery. While others in Washington have only bad checks to count, D’Amato may have set other kinds of Guinness records — seven immu­nized witnesses forced to testify about his actions, 41 wiretapped conversations from various federal jurisdictions where his name came up, 35 potential witnesses who took or said they would have taken the Fifth Amendment rather than testify about him, and four full days of sealed testimony by a senator seeking reelection.

Of course the committee never consid­ered the charges now being entertained by a federal grand jury in Washington, which is reportedly examining the senator’s attempt to induce a HUD regional director to per­jure himself for him. As Newsday‘s Bob Greene has revealed in recent days, the Washington prosecutors are also reviewing for possible perjury prosecution 11 pro-D’Amato witnesses who appeared before the Ethics Committee about the Island Park houses, and they are doing it on the recommendation of the Senate.

D’Amato has of course so far survived the recurring investigations that have dog­ged him, but conduct that so frequently attracts prosecutors yet falls short of an indictable offense is hardly an affirmation of innocence. Indeed these bouts with grand juries have become so routine that a self-conscious Newsday downplayed Greene’s exposé of the latest one, and the Gabe Pressmans of this city’s media pack have yet to shove a mike under the sena­tor’s chin to even ask him about the alleged perjury coaching. A prospective deputy mayor who may or may not have harassed a female aide has gotten much more atten­tion, even in the Times, than these criminal allegations against a senator up for reelec­tion. Astonishingly, Greene’s second story, shaking the foundation of the Ethics Com­mittee’s already hesitant findings on Island Park and announcing the probe of the 11 witnesses, was shunted off on page 23.

It is indisputable that if Abrams, rather than D’Amato, were suddenly revealed as the subject of a criminal probe, it would be banner headline news in every newspaper and would bury his candidacy. But even though the new charges against D’Amato resonate against a background of endless allegations (or perhaps because they do), they cannot compete with the media mag­net of another black hard-on and have been relegated to the back pages. D’Amato is once again saved, in part because of the familiarity of his sins. It is as if the worse editors in this city’s media establishment be­lieve he is, the less they will allow them­selves to reveal it.

Almost every one of these D’Amato scan­dals has involved a contributor, an unsur­prising fact for a public official who proud­ly told the Times that “only 35 per cent of those who give expect something in re­turn.” Since that adds up to over $3 million in quid pro quo contributions since 1981 — at a mere $ 1000-a-head — the senator has been very busy indeed, by his own account, delivering to demanding donors.

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The irony is that he has successfully made Abrams’s questionable fundraising techniques a focus of his campaign commercials, zeroing in on the Feerick Com­mission’s conclusion that the Attorney General solicited a $15,000 contribution from a developer who had millions in condo plans pending before Abrams’s office. What no one’s noticed is that D’Amato himself has collected $23,500 since 1980 from the family and employees of this developer, who goes unnamed in the sena­tor’s television commercial, and that D’Amato has done more for the developer than Abrams ever dreamed of doing. The devel­oper is Donald Trump, who in addition to contributing actually hosted D’Amato’s an­nual fundraising dinner at the Grand Hyatt at a deliberately reduced rate five years in a row during the ’80s. The senator in fact may have decided not to mention his friend’s name in the commercial for fear of jeopardizing the possibility of spending an­other weekend at Trump’s dazzling Mar-A-Lago in Palm Beach, as D’Amato did in the late ’80s — a far cozier scene than Abrams’s breakfast with Trump.

While there is no evidence that Abrams ever personally participated in his office’s review of Trump’s condo plans, D’Amato himself took the witness stand for Trump in the biggest legal case of Donald’s life, the United States Football League’s $3 billion antitrust suit against the National Football League in 1986. D’Amato was used as a witness to lay the groundwork for a key contention in the USFL case that was, in the end, flatly rejected by the jury: that the NFL had engaged in a conspiracy with New York Jets owner Leon Hess to block Trump’s USFL team from getting a New York stadium and franchise. D’Amato tes­tified about three conversations he had with Hess that supposedly proved this the­sis, but a Voice review of the legal billings submitted to the USFL after the trial has revealed that a partner in the law firm Trump handpicked for the floundering league talked to D’Amato shortly before two of the conversations with Hess. The timing of these contacts suggests that the Fonz may have been acting as a conscious agent of Trump’s lawyers when he called Hess, setting the Jets owner up for testimo­ny at trial.

The Voice has also obtained sealed side­bar discussions with the judge prior to D’A­mato’s testimony revealing that the senator was planning to testify about much more than his Hess conversations, but was stopped by an embarrassing legal ruling. He was prepared to detail talks he had with other senators who supposedly told him that NFL Commissioner Pete Rozelle “was making personal threats to yank franchises unless they voted right” on certain key NFL antitrust legislation “or to grant fran­chises if they would go that way.” But U.S. District Court Judge Peter K. Leisure ruled that D’Amato’s proffered testimony would violate the Speech and Debate Clause of the U.S. Constitution, which bars senators from revealing in court privileged conversa­tions with other senators. The judge pre­vented Trump’s lawyers from asking any questions about the Rozelle conversations, though D’Amato was apparently quite will­ing to break a senatorial confidence for his ingratiating supporter.

Such boldness, however, was a small mat­ter compared to how far he would go for that other billionaire emblem of the ’80s, Mike Milken.

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What Jesse Kornbluth in his new book, Highly Confident: The Crime & Punishment of Michael Milken, called the “leveraged buyout of Al D’Amato” is already a fairly well-known story. First reported in 1986 by The Wall Street Journal, it is standard D’A­mato fare, only this time with a peculiarly high level of impact. When the Fonz took the money and tanked it for Drexel, he managed, according to much of the hindsight analysis, to encourage the junk bond explosion in both corporate takeovers and S&L’s, leading eventually to the collapse of companies and banks laden with over­-priced debt.

While the Senate Ethics Committee cleared D’Amato of “any improper con­duct” on the Drexel charge, its carefully
worded finding addressed only the question of whether D’Amato had “changed his po­sition on junk bonds” after he “promised to introduce restrictive legislation.” Since the committee restricted itself to reviewing the charge only in its most damning form — a callous reversal of position after collecting the cash — the result was predictable. Unless Drexel witnesses at the very top were willing to say that they told him they’d give him thousands if he would tank the swirl of 1985 reform bills, the committee was doomed to come up dry.

Instead, of course, something vaguer hap­pened, and either Mike Milken, who per­sonally hosted the May 31, 1985, D’Amato fundraiser at Chasen’s in Beverly Hills, nor D’Amato, who tried embarassingly hard in retrospect to insinuate himself deeply in­side the glamorous Drexel fast track, is likely to ever say just what it was. But the fact is that the Milken party occurred, generating at least $34,000 for Alfonse barely two months after his subcommittee launched hearings on junk bond reform and just a week before Drexel CEO Fred Joseph testified. Then, one week after D’Amato pro­duced a watered-down study bill on junk that December, Joseph and 34 other Drexel executives bought $500 tickets to a giant D’Amato fundraiser in New York.

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D’Amato called the timing “absolutely coincidental,” but what is not coincidental was just how often this sort of awkward happenstance has hit the senator. When these two large chunks of donations are added to those from Drexel’s PAC and oth­er individual contributions, the Fonz’s total hits $70,750 by the end of 1986. Voice calls to many of the donors last
week found few willing to discuss their gen­erosity, though one, Jon Jetmore, said that “someone” at the company asked him to give, indicating that “it would be good for Drexel” and explaining that “there were few in Congress defending Drexel publicly and that D’Amato was the only one the company felt would listen.” Jetmore, who contributed after D’Amato produced his toothless December bill, recalled that the Drexel donations might have been connect­ed with the fact that D’Amato had “voted against inhibiting legislation” Drexel opposed.

If most of the donors were still shy about such a straightforward explanation, the sen­ators who were pushing for restrictive legis­lation at the time no longer are. Former Wisconsin senator Bill Proxmire, who has never before been quoted on the subject, said in a Voice interview last week: “The legislation could’ve been very good for our economy because it would have prevented hostile takeovers and that is certainly one of the reasons we have so many major bankruptcies today. [D’Amato] got contri­butions because he was chairman of the securities committee; they were buying in­fluence. PAC’s don’t contribute because they admire someone’s principles or their looks. I think D’Amato was unusually sup­portive of Drexel. That is why he got the contributions.”

Senator Howard Metzenbaum told the Times back in 1986, three weeks after D’A­mato was reelected, that D’Amato had giv­en him “a firm commitment” to introduce a bill aimed at curbing takeovers “before the July 4, 1985 recess,” but that it “never came to pass and I never heard another word about it.” Last week he told the Voice that D’ Amato later “offered a number of excuses for his failure to do so, none of which I considered compelling.” Metzen­baum added that D’Amato’s eventual bill came so late and was so weak it “effectively eliminated any possibilities of passing take­over legislation that session,” which came at an unusual, historical moment, when leading Republicans were temporarily out­raged by Milken tactics. “It’s clear that by failing to move forward as promised, Sena­tor D’Amato squandered a golden opportu­nity to enact meaningful reform at a point in time when it was needed most.”

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D’Amato counsel Mike Armstrong likes to point to a supposed discrepancy between Metzenbaum’s post-1985 comments and his attempt that November at typical sena­torial back scratching when he praised D’A­mato during a committee session for run­ning “excellent hearings.” But the fact is that in the same brief statement, Metzen­baum said he was still hopeful his reluctant colleague would “soon introduce his own tender offer bill,” making his ultimate dis­appointment perfectly consistent.

Most of the reporting about D’Amato’s Drexel relationship ended with that bill, but the relationship itself didn’t. Prime Drexel clients like Integrated Resources dumped $58,750 into the D’Amato coffers, much of it in the midst of the 1985 machi­nations, and employees of Saul Steinberg’s various Reliance entities donated another $56,000. Everyone from Drexel raider Boone Pickens to the Milken-manufactured billionaire Nelson Peltz to several Drexel lawyers like Richard Sandler to Milken publicist Linda Robinson dropped change in the passing D’Amato hat.

The senator was flown out to Beverly Hills for four days in April of 1986 at Drexel’s expense, paid a $2000 speaking fee, and entertained at the infamous High Yield Bond Conference, better known, at least after Connie Bruck’s 1988 book, as “The Predators’ Ball.” Before bringing him out to the coast, Drexel paid for a strange stop in Denver, where D’Amato was appar­ently the beneficiary of another fund raising festival, collecting over $18,000 from 51 Colorado donors, led by executives of the MDC home building company. Described in S&L bestseller Inside Job as “a junk bond Frankenstein given the spark of life by Dr. Milken,” MDC president Larry Mi­zel kicked in $1000 for D’Amato, while his brother and several other company officials gave $300, the ticket price for the party (two Mizel companies later pled guilty to making illegal campaign contributions to a Colorado congressional race).

Once out in California, D’Amato stayed in the luxury Palm Desert, condo of Co­lumbia Savings and Loan president Tom Spiegel, currently under indictment in Los Angeles for bilking his bank of millions and one allegedly illicit transaction with his mentor Milken. Drexel’s Dennis Levine, the insider-trading felon who wrote his memoirs in prison and was himself a D’A­mato donor, recounts one brief exchange with D’Amato during the notorious confer­ence festivities: D’Amato, “effusively work­ing the room” at a Chasen’s dinner party and approaching his table, slapping Boone Pickens on the back and extending “a warm hello” to Boesky. When D’Amato moved on, Boesky muttered to Levine, “That bas­tard cost me five thousand dollars” — an apparent reference to past campaign contributions.

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The Republicans lost the Senate, and D’A­mato lost his subcommittee, in the begin­ning of 1987. With Boesky’s indictment a few weeks earlier, Drexel, too, was in the midst of dramatic change. Instead of chas­ing every consumable company, they had suddenly become the quarry themselves. Ironically, Drexel’s pursuer was none other than an appointee and friend of Al D’Ama­to’s, U.S. Attorney Rudy Giuliani, whose office had wired up Boesky for meetings with Milken shortly before the inside trad­er’s $100 million guilty plea was publicly announced. The fear of Giuliani on Wall Street and in Beverly Hills was palpable at the time: pressing forward with new theo­ries of securities prosecutions, he seemed both unreachable, in standard political par­lance, and dangerously skillful when it came to making towering cases stick.

Before 1986 ended, Mike Milken’s broth­er Lowell, a top Drexel executive with po­tential exposure in the unfolding scandal, hired as his criminal attorney Mike Arm­strong, the senator’s strong right arm. A former federal prosecutor and the principal powerbroker on the D’Amato screening panel that nominates federal prosecutors and judges in New York, Armstrong imme­diately flew out to California to meet with his client and his client’s brother. Over the next three years, Armstrong would play a broad role in the joint Milken defense, run­ning up a fortune in Drexel and Milken bills (he still represents Lowell on outstand­ing civil matters).

Armstrong maintained in a Voice inter­view that neither Milken brother discussed his ties to D’Amato. At the time, however, Armstrong was starting his seventh year of periodic pro bono representation of D’A­mato. Beginning in 1980, during the first Senate campaign, D’Amato asked Arm­strong to advise him about the possible release of his earlier grand jury testimony about a Nassau County 1 per cent kickback scheme, which had become a hot issue in a close race. Named to D’Amato’s panel as soon as the senator took office in 1981, he continued representing D’Amato in a feder­al probe of the senator’s involvement with a Hempstead recycling plant, ultimately ap­pearing in court with the senator when D’Amato testified at the trial of one recy­cling plant defendant. He was there again in 1983 when D’Amato appeared on behalf of Phil Basile, and later during the senator’s Wedtech testimony.

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Armstrong’s Legal Aid list for D’Amato, including aspects of the many HUD inves­tigations and the Meade Esposito case, goes on and on. He didn’t charge D’Amato, however, until 1989, when he took on the senator’s defense in the Senate Ethics Com­mittee probe. Today, a senator who claims a net worth of $60,000 owes Armstrong $400,000 for the concluded probe.

A few months after Armstrong went on Drexel retainer (he was paid by the compa­ny until the two Milkens were indicted in 1989, when Lowell was forced to pay his own bills), Al D’Amato called Giuliani and said he “wanted to talk politics,” inviting him to dinner and asking that he bring his wife, television newswoman Donna Hano­ver. Though D’Amato wasn’t any more spe­cific than that, Giuliani discovered what the agenda for the August 1987 dinner was while riding there in his car. WTNS report­ed that D’Amato was trying to talk the politically ambitious Giuliani into running against Democratic senator Pat Moynihan. That night, for hours, and for weeks later, chummy Al kept the pressure on, promising to raise millions for the run. Giuliani, whose four-year term was winding up, was sorely tempted, even writing a declaration speech at one point. But U.S. Attorneys don’t have to leave when their term expires, and Giuliani was also reluctant to leave, with so many giant cases hanging in the balance.

Giuliani and D’Amato, undercover on a 1986 drug bust

He asked that D’Amato allow him to pick his own successor, announcing public­ly his preference for an aide, Howard Wilson, but D’Amato balked. Then news re­ports appeared listing a half dozen finalists that Armstrong’s panel was considering to replace him, and describing prominent de­fense attorney Otto Obermaier as the front­runner. This worried Giuliani, and he said so in news interviews, but only in the most general terms, expressing a concern that several of the senator’s prospective appoin­tees specialized in representing the securi­ties industries or white-collar criminals. When D’Amato charged that Giuliani’s re­luctance was “provocative and not too smart,” Giuliani replied that he’d tried to “convey to the senator that I’m not being arrogant,” adding that he was “concerned about four or five very, very sensitive investigations.”

The concerns started with Armstrong, whom Giuliani refused to talk to about the transition, precisely because of the defense lawyer’s Milken conflict, a message Arm­strong concedes was sent directly to him. Another powerful player on the panel, Paul Curran, represented Robert Freeman, the head Goldman, Sachs trader whose Wall Street handcuffing and arrest in early 1987 had caused a media stir. Obermaier had a client squarely in the middle of the same case. Bob Morvillo, a partner in Ober­maier’s small, top-flight criminal firm, was just starting to represent Tom Spiegel, the senator’s California condo host whose S&L had $3 billion in Milken junk. The firm was also representing top Drexel brass, includ­ing one potential witness it has refused to identify when questioned by reporters to this day. While Obermaier seemed the all­but-certain designee, others on the pub­lished list of candidates were also involved in the securities cases, including a partner of Peter Flemming, Mike Milken’s princi­pal attorney.

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The efforts to induce Giuliani to leave were so carefully monitored at Drexel that the weekly meetings of its so-called “War Council” — discussions that included 15 or so executives, lawyers, and consultants — ­were regularly interrupted by chitchat about his possible departure. Even Arm­strong conceded in a Voice interview that he “may have talked about the Southern District situation in a conversational way” with his client Milken. “I didn’t agree with the way Rudy was running the office,” says Armstrong. “I wanted him to leave.” Arm­strong had in fact convinced D’Amato to name John Keenan to the post in 1983, and the Keenan appointment was only blocked when Giuliani, who worked in the Justice Department then and had strong support there, prevailed on D’Amato to change his mind.

Armstrong also acknowledges that it was he who recommended Obermaier, an old colleague from their days in the U.S. Attor­ney’s office together, though he claims he was unaware of Obermaier’s published views, mostly in a New York Law Journal column, bashing insider-trading and other securities cases. It was this philosophy that most upset Giuliani, since not even an Obermaier recusal on an individual case where his firm had a client could protect the office’s securities prosecution from a wholly different point of view about every­thing from the use of the RICO statutes against white-collar criminals to deferring to the SEC on trading cases. Giuliani was so uncomfortable with these columns he carried them around with him and showed them to friends. “Otto had the same point of view as everyone else,” Armstrong ar­gues now, listing several former securities prosecutors who shared Obermaier’s views, and not even noticing that all of them wound up with Drexel clients. “Rudy didn’t know shit from Shinola about securi­ties cases,” Armstrong declared.

By early 1988, Giuliani had all but decid­ed to pass on the Moynihan race. Wilson had appeared before the D’Amato panel, and Armstrong and Curran had left the room during his interview, implicitly recus­ing themselves on his review, though at least Armstrong was clearly involved in the ultimate selection. Neither Giuliani nor Wilson would return Armstrong calls on the matter or discuss it with him, until he final­ly cornered Wilson at the swearing-in of a federal judge. According to a memo Arm­strong prepared — out of what he says was caution over how Giuliani might one day misinterpret his conversation with Wil­son — he offered to make Wilson chief assis­tant under whoever was the new U.S. At­torney, and give Wilson control over “the ongoing investigations about which Rudy had expressed concern.”

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While Armstrong sees this memo as proof that Drexel wasn’t his motive in try­ing to facilitate a Giuliani departure, it is clear that Armstrong’s offer was a last-ditch proposition on the eve of Giuliani’s an­nouncement that he would not run. Indeed the memo reports that Wilson told Arm­strong that Giuliani had already decided not to run even though he very much wanted to.” Wilson says that Armstrong “may have said I’d be someone’s deputy, but I don’t think so”; he was “positive that the Drexel thing wasn’t presented.” Even Jesse Kornbluth, whose sometimes-persua­sive Milken book is a staunch defense, spent hours discussing this pivotal period in the effort to block a Milken indictment with Armstrong, Milken, and many others, leading him to tell the Voice last week: “It’s pure projection; but it’s hard to believe that the effort to get Rudy out wasn’t fully dis­cussed. God knows every other avenue of saving the Milkens was gone over innumerable times from 1986 to the end.”

When Giuliani announced he wouldn’t run, D’Amato seemed to lose whatever in­terest he ever had in fielding a Republican opponent against Moynihan, endorsing an obscure Long Island businessman who’d long been a backer of his, but declaring that he was “too busy” to campaign with him. Giuliani stayed in the office another year, took Drexel’s guilty plea but could not get Milken’s. In a sudden, and deliberately ar­ranged maneuver, he resigned and brought back to the office from private practice a onetime top aide, Benito Romano, getting the Justice Department’s approval to install him as an interim U.S. Attorney in an end-­run around D’Amato. One top Justice De­partment official who cut the Romano deal with Giuliani, Robin Ross, said that an angry D’Amato called him and was “quite blunt about his displeasure.” D’Amato immediately moved to nominate the ever-pa­tient Obermaier, but Justice and the White House sat on his name for 10 months, leav­ing Romano in office.

That gave Romano time to finally either indict Milken or get a guilty plea. When the two Milkens did not meet a March plea deadline offered by Romano, he filed a racketeering indictment against them. Though Romano remained in office until October, Milken’s lawyers never resumed plea discussions with him. “I wanted to resolve the case before D’Amato’s replace­ment got there,” Romano told the Voice. “Whether they were waiting” for Ober­maier, “you’d have to ask them.” A few months after Obermaier arrived, Mike Mil­ken finally pled guilty to six felony counts, none of them on the racketeering charges, and the always-difficult case against Lowell Milken was dropped.

Obermaier recused himself on the case, as he has on at least 34 other cases that went to indictment since he took office. (Since the only information the office will provide about this unprecedented number of recusals is the press releases issued by the chief assistant when Obermaier is con­flicted out, there is no way to count recusals in cases that never get to indictment. By contrast, the U.S. Attorney in Brooklyn, Andy Maloney, has recused himself on two cases though he’s been in office twice as long as Obermaier.)

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While there are certainly aspects of the office’s handling of Milken that have con­tinued the tough traditions of the Giuliani/Romano era, the decision this summer to write a letter to sentencing judge Kimba Wood, citing his “substantial” cooperation, in direct contradiction to a letter sent by the SEC enforcement chief, has been widely questioned. What Giuliani himself says made the government’s position on sen­tence reduction so strange was that its letter offered no critique of Milken’s testimony as a defense witness for one Drexel client, even though Milken’s “appearance against the government was expressly rejected as unbelievable by the jury,” which convicted Milken’s friend anyway.

Wood, who wound up citing the letter from Obermaier’s office as a basis for re­ducing Milken’s sentence to two years (slightly less than Boesky, the witness who brought him down), did not dispute in her opinion the SEC contention that Milken was principally offering information to prosecutors about Drexel folks who’d coop­erated in the investigation of him. The judge cited only one other letter in her decision — a voluntary submission helpful to Milken on the issue of his attempt to make restitution to those he’d damaged. The attorney who wrote it, Pat Hynes, rep­resented a group of civil claimants whom Milken had agreed to make a sizable pay­ment to, though she was hardly the princi­pal litigant in these separate lawsuits. A close friend of D’Amato’s who Armstrong acknowledged used to date the senator, Hynes was recently dubbed by D’Amato to join the Armstrong screening panel.

In addition to the favorable treatment for Milken by Obermaier’s office, it has also recently passed on retrying the Drexel spin­off, a case against several traders from Princeton-Newport that was overturned principally due to a sentencing error by the judge, and also decided not to prosecute Columbia S&L’s Spiegel (eight months lat­er, federal prosecutors in L.A. indicted him on largely different charges). Obermaier re­cused himself on these cases, as well he might since his law firm is extensively in­volved in both. But his recusal did not prevent him from summarily dismissing the prosecutor who’d tried Princeton-New­port and, though he’d since left the office, was available to work on its appeal. Ober­maier used the assistant’s appearance in a television interview as a rationale.

While there is no smoking gun establish­ing what D’Amato’s purposes were in all the intricate machinations surrounding his Southern District appointment, the final proof is in the pudding. The office that once pioneered Wall Street cases has not made a new, significant securities prosecu­tion since the “scholar-on-Ottomatic” got behind Rudy’s desk.

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It Is January 1983 and Al D’Amato, just starting his third year in the senate, is aboard a chartered flight to Panama City. He and his daughter Lisa are taking a four­-day trip to Panama paid for by the Long Island petroleum giant that will soon em­ploy her as an economic analyst, Northville Industries. While Northville will fly over 300 people down to Panama to join in ceremonies and receptions celebrating the opening of its new, 80-mile pipeline across the heart of the Isthmus, D’Amato is the only U.S. senator aboard. But he isn’t going just because of his daughter’s imminent job.

In fact his daughter’s job was an out­growth of his own almost 30-year friend­ship with the president of this family­-owned firm, Harold Bernstein. According to Northville vice-president Joseph Ackell, Bernstein and the company were major financial supporters of D’Amato’s during the early days in Nassau politics, and news reports indicate that on occasion, at least, he purchased oil from them as Hempstead’s presiding supervisor. Since D’Amato’s 1980 primary race against then senator Ja­cob Javits, the Bernstein family, the company PAC, and a few Northville executives and their wives have donated at least $28,000 to D’Amato campaign coffers. In addition, Bernstein was named by D’A­mato as one of his six top fundraisers in a 1986 Times story.

The pipeline Northville opened that Jan­uary was erected by the U.S. Congress. Its viability to this day utterly depends on the periodic renewal of a controversial piece of legislation barring the export of Alaskan oil anywhere outside the U.S. (its principal pri­or market was Japan). Originally instituted in the mad days of the 1970s energy crisis, and rationalized as part of a national strate­gy for oil independence, the ban led to the building of the pipeline in 1981 — D’Ama­to’s first year in the Senate. The senator has been a major force in the preservation of that ban ever since, helping to sustain the pipeline, which stretches from the Pacific coast port of Charco Azul to Chiriqui Grande Bay on the Caribbean and is designed to carry 800,000 barrels of oil a day.

Far cheaper than shipping the oil through the Panama Canal, the pipeline has become the principal conduit for the transport of Alaskan oil to markets along the East Coast of the United States. It also became, as spokesman Ackell described it in a Voice interview, “the biggest thing going in the Panamanian economy,” throwing off hun­dreds of millions in taxes, fees, and pay­ments to Panama’s government, which is a partner with Northville in the ownership of the line.

[related_posts post_id_1=”719172″ /]

Of course, the government of Panama in 1983 was dominated by military strongman Manuel Noriega. Already serving as the number-two man in the Panamanian mili­tary that January, he was slated to become commander in chief by March under the terms of a prior agreement with his ally, Ruben Paredes (a short delay resulted in Noriega’s formal takeover that August). The country’s civilian vice-president, Jorge Illueca, a Noriega front whom he would later install as president, hosted the actual opening ceremony, which was held near a remote Indian village outside Panama City at the Atlantic terminus of the pipeline.

While Ackell says he did not see Noriega himself at the ceremony or any of the host of receptions and other events surrounding the four-day celebration, others remember his participation, including Noriega’s one­-time minister of commerce and industry Mario Rognoni, who is currently the oppo­sition leader in the Panamanian National Assembly. Ackell also tries to downplay the company’s relationship with Noriega dur­ing the flush years of 1983 to 1987, but he concedes that Northville “had to find a way to work with each administration.” Everett Briggs, the American ambassador to Pana­ma during most of that period and current ambassador in Portugal, goes a bit further, recalling that “it’s safe to say” that the relationship between Northville and Nor­iega was “probably very good.”

Just how D’Amato fit into this relation­ship is somewhat murky, though Ackell ac­knowledges that the senator “might have been identified with the company” in the minds of Panamanian officials, then and now. The senator flew down to Panama for a second four-day stay paid for by North­ville in December of 1983, after Noriega’s formal ascension to power, but Ackell said he could not recall why (Northville paid for a third D’Amato trip in 1988 as well, this time, to Pennsylvania).

[related_posts post_id_1=”727956″ /]

Escolastico Calvo, the editor of a Pana­manian newspaper who once served as a close Noriega aide, specifically recalled a D’Amato meeting with Noriega in Panama, but was fuzzy about the timing. And legisla­tor Rognoni was certain that D’Amato and the general “knew each other personally” and that D’Amato was “friendly” with the Noriega government “while he was dealing with his business interests,” which he iden­tified as Northville. D’Amato routinely vot­ed in favor of military and other aid appro­priations for Panama during these years, though he hardly distinguished himself as particularly active on these issues.

What he did distinguish himself on was pipeline legislation. As a member of the banking committee, which has jurisdiction over the Export Administration Act, he be­came a cosponsor in 1983 of a bill that passed the Senate a year later extending the Alaskan oil ban for six years. D’Amato even went so far as to introduce, with a handful of other senators, an unsuccessful measure to extend the ban forever. This bill also attempted to void the conditions con­tained in the old law that permit the presi­dent to lift the ban, with the consent of Congress, if he could make a showing that it was in the national interest (D’Amato is still pushing this rather extraordinary bill, having cosponsored it again in 1990). The ban is still effective even though its last extension expired in 1990, since it remains in force unless the president meets the conditions set in the law for lifting it.

There is little doubt about why D’Amato has been such a pipeline champion. Ted Sorenson, the former Kennedy aide who has represented Northville for years, says D’Amato called him at one point in the 1983 controversy over the bill: “He said he was going to make a speech for it on the floor and I said fine.” Why was he on the inaugural trip and why has he been such a strong supporter of the ban? “He’s a friend of Harold Bernstein,” explained Sorenson. “They went way back.” Steve Toth, the Washington lobbyist for Chicago Bridge & Steel, which is a 20 per cent partner of Northville and the Panama government in the ownership of the pipeline, put it simi­larly: “D’Amato supports the ban because the principal owner is Northville Industries and Al supports his constituents. He shows his support with his votes.”

Like Northville and the other bulwark of the lobbying force behind this legislation, the maritime industry, D’Amato has resist­ed any efforts to modify this total ban. The coalition even opposed Alaska Republican senator Frank Murkowski’s amendments to permit the export of 200,000 barrels a day. Based on the premise that it is wrong to bar only Alaska from exporting its oil, Mur­kowski’s changes were nonetheless rejected, though he offered to continue to require that the exported oil be carried on U.S.-flag tankers.

[related_posts post_id_1=”726468″ /]

Critics of the ban, like Marshall Hoyler, who did a study for the Georgetown Uni­versity Center for Strategic and International Studies, have branded it “a scandal,” saying it has “enriched a small number of individuals and corporations, who have formed a vocal interest group in its behalf.” Hoyler calculated years ago that federal revenues would jump over $10 billion over the next quarter century if the ban was dropped (and that oil costs would drop over the long haul). A staff economist for the Senate Banking Committee, Paul Freeden­berg, explained the support for the ban when the D’Amato extension was under consideration in 1983 by observing: “Too many people are making money because of the way it is now.”

While the strongest rationale advanced for the ban is the need to reduce American dependence on foreign oil, William Silvey, the Energy Department’s planning director, argued when the ban was last extended that “the congressional perception” wasn’t tak­ing into account that “there is one world petroleum market and that we are part of it,” concluding that because of the export restrictions, “we are charging ourselves more than we need to” for oil.

But there are indications that D’Amato’s ties to Northville help explain more than just the pipeline aspects of his Panama pol­icy. All the public remembers about D’A­mato and Panama is his explosive opposi­tion to Noriega, when he moved center stage in the Washington debate about Pana­ma policy in mid 1987, at first urging sanc­tions and eventually an invasion. Though D’Amato’s rage was ostensibly over Norie­ga’s cocaine trafficking (D’Amato called him “a tinhorn drug dealer”), it is hard to explain it on just those terms. Sy Hersh had revealed Noriega’s smuggling activities in June of 1986 on the front page of The New York Times, even detailing an American plot to assassinate the then lieutenant colo­nel in the 1970s as a common drug dealer. Yet D’Amato remained silent for almost a year.

Like many other senators, D’Amato moved when Gabriel Lewis, the former Panamanian ambassador to the U.S. and onetime Noriega ally, broke with the gov­ernment and began lining up opposition to it in Washington. One of the architects of the Panama treaty, the well-connected and wealthy Lewis, who once hid the Shah of Iran in his Panama home as a favor to American authorities, struck up a close re­lationship with D’Amato. Long tied to the Kennedys, and close to Ted Sorenson, Lew­is was one of three Northville appointees on the board of Petroterminal de Panama, the joint venture of Northville, Chicago Bridge & Iron, and the Panamanian gov­ernment that owned the pipeline.

[related_posts post_id_1=”726007″ /]

Lewis pieced together the Kennedy/D’Amato alliance that suddenly turned the Senate into a firestorm of Noriega opposition. D’Amato even became a harsh Rea­gan administration critic on the issue, blast­ing the administration as
“cowards” for not moving against the general and provoking Defense Secretary Frank Carlucci to public­ly object to D’Amato’s “insults.” The sena­tor solidified his relationship with Lewis during this rhetorical war, getting so close that he has become a periodic visitor at Lewis’s Panama estate since Noriega’s ovenhrow.

It would be an oversimplification to attribute D’Amato’s sea change solely to a Northville agenda. While many factors were surely involved, D’Amato’s goal of compelling an American take-out of Nor­iega was perfectly compatible with North­ville’s objectives. The company’s spokes­man Ackell concedes that during this period, Northville was “very anti-Noriega,” including “everybody who worked for us down there, from the workers to the manag­ers,” adding that the company was “pleased” with the December 1989 inva­sion. Indeed, on the eve of the invasion the Washington Post reported that if it “contin­ues as planned, it should become easier for Northville Industries to do business in Panama.”

Relations between Northville and Nor­iega were so strained in 1988 and 1989 that the company stopped meeting altogether with its partners on the Petroterminal board, which Noriega had stacked with his brother-in-law, publicist, and finance min­ister. A freeze ordered by the Reagan ad­ministration, and expanded under Bush, barred Northville and other American busi­nesses in Panama from making any pay­ments to the Noriega government, and Northville pumped over $70 million due to Panama into an escrow account here. Northville got a waiver from federal offi­cials so that they could keep the payments in its own account, rather than make them to the exiled Delvalle government, a shell entity recognized by the U.S. Fat with funds from other American interests, the Delvalle government retained as its lobby­ist John Zagame, the former D’Amato aide who is still very close to the senator, and Rich Bond, the current head of the Repub­lican National Committee.

Throughout these tense two years, the pipeline continued to function virtually un­interrupted, with Noriega apparently con­vinced that any disruption of the line might be used as a rationale for an American invasion. He even used his army to force striking electrical workers back on their jobs in early 1988, in part because the strike had knocked out a pumping station along the pipeline. While anti-invasion leaders like Rognoni believe that Northville was itself trying to cause a stoppage in early 1988 to provoke U.S. action against Nor­iega, Ackell says the company was simply biding its time.

Since Noriega was replaced with the cur­rent American-installed Endara govern­ment, relations with Northville, said Ackell, have been “very good, as good as things can go.” The only one left muttering is opposi­tion leader Rognoni, who calls D’Amato a hypocrite and claims that Noriega himself once told him “how surprised he was that D’Amato had turned against him.” ❖

SPECIAL REPORTING ASSISTANCE BY SUSANNA DOYLE. RESEARCH BY SCOTT ANDERSON AND LOU PACILLI. 

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LETTERS TO PRISON

While U.S. Senator Al D’Amato was ready to go to war in Panama to nail one drug dealer, his office relayed letters to federal prison officials on behalf of 23 drug dealers who were complaining about their treatment in jail, the Village Voice has learned. The senator also for­warded letters from two mob bosses, in­cluding Phil Rastelli, the former head of the Bonanno crime family.

While other federal officials also pass along similar letters, D’Amato has set a record for one more form of constituent service. The U.S. Bureau of Prisons says it sent 50 prisoner response letters in a recent year to D’Amato, compared with a mere 15 for D’Amato colleague Pat Moy­nihan, and a total of 13 to a sample group of five congressmen.

From 1987 10 1991, crimebuster D’Amato sent more than 200 such letters about inmates whose offenses ranged from heroin and cocaine distribution to murder and racketeering. The prisoners’ sentences ranged from a year to 75 years, including one drug dealer with a 20-year sentence. Because prison officials will only disclose fragments of the correspondence file, it is impossible to determine how many times D’Amato wrote his own letter on behalf of the prisoner in addi­tion to relaying the prisoner’s letter.

The letter D’Amato forwarded for Phil Rastelli sought a transfer from Oklahoma to a prison closer to his New York home, citing medical reasons. The June 1987 letter to D’Amato was written only eight months after Rastelli began serving a life sentence. When D’Amato sent the Ras­telli request to the bureau, his form letter took no position on the merits of the proposed move.

Robert Fueselo, executive director of the Chicago Crime Commission, said he regarded the routine forwarding of these letters “as inappropriate as can be to act on behalf of any prisoner who has been involved in hideous crimes, let alone an organized crime boss.” Rudy Giuliani said it was okay to forward this kind of letter without screening it, “except in the most notorious cases.” D’Amato for­warded more letters for drug offenders than any other criminal category. — W.B.

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Grading Anthony Weiner’s Audition As A TV Pundit

Anthony Weiner went on NY1’s Road To City Hall Tuesday night, where the former mayoral candidate sat alongside Mark Green, former public advocate, and Alfonse D’Amato, former senator, for the show’s political analysis segment, “WiseGuys.”

We’ll say this: it went a lot better than his appearance on MSNBC. How much better, you ask? We kept score.

On losing the nomination

“Look there is this level of discontent and concern out there that Bill de Blasio tapped into–he won, I lost.” {+1 for being a good sport, +1 uniting behind the party’s candidate}

On what voters want

“They want to see what you’re going to do. Now, maybe I did too much by having 125 of them, a couple books, {-1 for thinking that was his biggest problem} but, but de Blasio he does have a concrete plan to fund early childhood education. He laid it out and advertised and talked about it.”

On the realities of being mayor

“You want to show people as mayor what you’re going to fight for everyday and not compromise on–even though you probably will.” {+1 for keeping it real}

On Christine Quinn

“She probably should have, at some point, said, you know what? That term limits thing, maybe I shouldn’t have done it.” {-1 for giving a candidate who finished better in the primary advice on running her campaign}

“I don’t know what the answer is–I’m not good at giving out [advice to] my own campaign, apparently, let alone other people’s {+2}–but I do think that it became problematic that there wasn’t anyone who truly felt okay, she’s mine and here’s why.”

On Joe Lhota

“His biggest problem is that he doesn’t know if this campaign should be a proof point on his single best thing on his resume, according to him, which is his relationship with Giuliani. If this becomes referendum on Giuliani then he loses, and if it doesn’t become a referendum on Giuliani then why is he running? {+1, good point} It’s like, he is, he’s in a difficult spot.”

On lessons learned from the campaign

“The other lesson we learned? When people say public advocate is good for nothing, it’s good for one thing–becoming the nominee for your party.” {-3 for not being very good at learning lessons}

If you tally it all up–factoring in points docked throughout the segment for not engaging with the other panelists–Weiner had a pretty decent showing. And it wasn’t physically painful watching him, which was a nice change from the campaign.

 

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The New Dealer

You couldn’t give an opponent much more of a beating than the one Eliot Spitzer handed John Faso last fall. Any worse and you’re talking possible fraud or felony assault charges. When the official tally for the New York gubernatorial race was posted in January by the
state Board of Elections, it showed Democrat Spitzer with just shy of 70 percent of the valid
votes cast, thrashing the hapless Long Island Republican by more than 1.8 million ballots.

Pow! Bam! That’s a mandate, no questions asked. New Yorkers gave the former attorney general a bright green light for the mission he promised during his campaign, the one where he pledged, on “Day One everything changes.” By “everything,” Spitzer made clear on the stump, he meant Albany’s stalled government, its fractured ethics, and the anything-goes approach of the previous 12 years that showered perks and deals on the well-connected.

Which is why many political watchers did a sharp double take when Spitzer’s first big economic-development announcement delivered a potential windfall to a passel of business-as-usual
Republican operatives, a crew consisting of some of former governor George Pataki’s closest cronies, who have aligned themselves with a company desperately trying to shed the taint of past corruption by former officers.

On February 19, just seven weeks after taking office, Spitzer did something even Pataki never worked up the nerve to do, signing a formal letter of support to the U.S. Department of the Interior calling for a controversial new Las Vegas–style casino to be created in the Catskills.

The notion of Catskills casinos has been bandied about for so long it has started to rival Rip van Winkle as a favorite local myth up in the mountains. But after years of government dancing and dallying on the subject, Spitzer’s sudden move was the most concrete step taken so far. And if it comes to be, there’s no question
that there’s a pot of gold waiting for the successful entrepreneurs who will be able to offer gambling-happy New Yorkers a destination that’s at least a half-hour closer than either
Atlantic City or Connecticut’s two gambling spas.

The planned $600 million gaming emporium, to be built on 29 acres at the Monticello Raceway in Sullivan County, would boast 3,500 slot machines, 150 gaming tables, and a 600-seat
nightclub. The proud owner of all this would be the St. Regis Mohawk Indian tribe, whose reservation happens to be about 400 miles north of the site, on the New York–Canada border. This is where the Interior Department comes in: It must approve any off-reservation casinos and take the 29 acres “in trust” for the tribe. That’s a prospect many believe dubious at best—but more on that later.


Dennis Vacco
Frances Roberts

Relations between the St. Regis Mohawks and state government have been tense for years over law enforcement complaints of drug, alcohol, and cigarette smuggling across the border. But unlike the rest of the state, gambling is legal on tribal land, and since the tribe has promised to cut the state in on casino profits, there’s a standing agreement to let bygones be bygones (provided that state taxes are henceforth paid on reservation smokes).

If the arrangement holds up, the Mohawks are poised to get a small piece of revenge for that 400-year-old swindle when the Lenape Indian tribe of Manhattan got taken to the cleaners by some cunning Dutch real estate brokers.


Much closer to Albany’s political heart, however, is the company that is going partners with the Mohawks. Empire Resorts, a publicly traded corporation, is now closer than anyone has ever gotten to winning the most sought- after prize in a generation of state favor-seekers: a Taj Mahal in the old Borscht Belt.

In its pact with the Mohawks, Empire gets the right to handle everything from blackjack tables to hotels, ATMs, and lounge acts—in exchange for 30 percent of net revenues plus a host of other development fees. In a press release after Spitzer’s announcement, the company eagerly promised to deliver a “world-class” casino at the site.

Empire has gotten to this point despite a history of financial scandals involving past officers, allegations of mistreating other
Indian tribes, and the crassest of ties to the Albany old boys’ club that surrounded ex- governor Pataki.

Or is it because of that?

One of those who first heard the casino dinner bell ringing and joined up with Empire’s original incarnation was Pataki’s economic-development czar and top fundraiser, Charles Gargano, who served as a board member and director. Gargano, a former construction executive, was so blasé about his potential conflict of interest as a key player in what was then known as Alpha Hospitality Corporation that it took a 1995 state legislative hearing to embarrass him into stepping down as a director. Even then, Gargano delayed shedding his interest in the company for months, offering contradictory statements about how much stock he owned and what he’d done with it. He instructed aides initially to say that he’d put his shares in a blind trust, and later that he’d sold them. Although he minimized his interest in the company at the time, Gargano recently griped to The New York Times that he lost $625,000 on his $800,000 investment—a figure that doesn’t quite fit the chump-change definition.

[

Alpha was reorganized into Empire Resorts after it hit some particularly rough water in 2002, when six of its former directors and officers were indicted on federal charges of bank fraud and tax evasion. The charges stemmed from what the feds said was a $100 million swindle of creditors who had backed the businessmen in their takeover of the Days Inn hotel
chain. Alpha was never charged with wrongdoing, but five of its execs were later convicted.



Still unresolved is the case against Alpha’s founder and patriarch, a white South Africa–born hotel mogul named Stanley Tollman. When the charges came down, Tollman decided to hole up in London, out of reach of American laws. The U.S. Attorney’s office in Manhattan considers Tollman a fugitive and has been seeking to extradite him ever since. Tollman’s lawyers insist he’s innocent and that he merely retired abroad around the time of his indictment. But the 76-year-old tycoon has good reason not to want to face the music: His former partner, hotelier Monte Hundley, was sentenced to eight years in prison after conviction; Tollman’s son Brett pled guilty and got a 33-month sentence. Tax fraud charges are also pending against Stanley Tollman’s wife, Beatrice.

Even after Gargano stepped down from Alpha’s board, he remained close to Tollman. The two toured Africa together in Tollman’s jet, and Gargano often flew to Palm Beach with his friend. Although Empire insists that Tollman plays no role in the reconfigured corporation, he still holds an $11 million stake in the company and, as the corporation has stated in disclosure filings to the Securities and Exchange Commission, “there can be no assurance” that regulators won’t look askance at the connections. If so, investors were warned in a 2006 report, “We could lose our gaming licenses or be forced to liquidate certain or all of our gaming interests.”

Tollman’s status in the company also remains a hot potato for state officials. Empire currently operates harness racing at Monticello and has 1,500 video lottery terminals in place. But when the Voice tried to ask the Racing and Wagering Board and the state Lottery Division whether they’d reviewed Tollman’s possible role, officials had conniptions. A top Lottery official promised three times to respond, but never delivered an answer. Racing and Wagering officials went mum, insisting on a freedom-of-information request—and then provided Empire’s SEC filings.

But none of those murky shadows appear to have bothered the stalwarts of Team Pataki who flocked to the casino company in recent years.

Among the current major shareholders in Empire Resorts is a developer who was one of Pataki’s closest allies and biggest campaign contributors. Since 1994, builder Louis Cappelli, along with family members and business associates, has chipped in more than $400,000 in gifts to Pataki and state Republican committees. Cappelli did well in return, winning leases and contracts from the administration. In one embarrassing episode, the Manhattan District Attorney’s Office launched a criminal probe after opposing bidders complained of favoritism when Gargano awarded a Cappelli-tied firm the rights to develop a huge swath of state-owned land at Pilgrim State Hospital on Long Island. No charges were brought, but the deal was scuttled.

Also holding a major stake in the venture are brothers Joseph and Ralph Bernstein. The pair have long been active developers, but have kept a low profile since congressional hearings in 1986 revealed that they had acted as fronts for ex–Philippines dictator Ferdinand Marcos, who plundered his country’s treasury to invest in New York City real estate. In 2001, Joseph Bernstein gave Pataki a $5,000 donation.

Then there are the lobbyists who have been pounding up the capitol steps for the past few years pushing this project ahead.

The leader of the pack is Kieran Mahoney, who managed all three of Pataki’s gubernatorial races. A protégé of former senator Alfonse D’Amato, Mahoney turned to lobbying after Pataki was elected. Records show Mahoney’s
Mercury Public Affairs pulled in $213,000 in lobbying fees since 2004 pressing Empire Resorts’ goals with the governor’s office and the legislature. Mahoney also earned an unspecified amount—such fees often run as high as 25 percent—for placing $220,000 in radio ads promoting the project.

[

Also lobbying for Empire has been Jeff Buley, the longtime counsel to the state Republican Party. For years, Buley was partners with Albert Pirro, the influential Westchester lawyer
and Pataki ally whose repeated scrapes with the law—including an 11-month prison stint for tax evasion—helped undo a budding political career for his wife, former Westchester district attorney Jeanine Pirro. Al Pirro got his own bite at the casino apple when his friend Louis Cappelli hired his firm as a consultant on environmental remediation near the casino site.

Buley had influence in other ways as well. During the years Buley was on the corporation’s payroll at $7,500 a month, his wife, Cheryl, was a member—and later the $120,000-a-year chairwoman—of the state Racing and Wagering Board, the panel overseeing state racing operations. On his way out the door, Pataki handed Cheryl Buley another patronage plum in the form of a six-year term as a $109,000-per-year member of the state Public Service Commission (where she is currently giving Spitzer headaches by complaining of harassment by other board members).

Then there’s lobbyist Peter Delaney, who has been a Pataki intimate since the ex-governor’s
days as mayor of Peekskill, when Delaney, an aspiring developer, hired Pataki as his broker on a $1 million land deal there. Delaney served as Pataki’s first commissioner of General Services, where he engendered his own controversies when it was reported that he had helped steer lucrative construction contracts in state-leased properties to Cappelli’s companies. Last year Delaney’s lobbying firm, Prostart Inc., was paid $160,000 by Empire, and filings show it continues to rack up fees from the corporation at a clip of $15,000 per month.

Even Spitzer’s old nemesis, former state attorney general Dennis Vacco, is a hired gun for the casino outfit. Vacco, who won election on the GOP ticket with Pataki in 1994, lost four years later in a bitter race to Spitzer, then a neophyte politician. During the campaign, Spitzer savaged Vacco as unethical and incompetent. Vacco, however, quickly re-emerged as an influential Albany insider, first as head of a big trade-waste company, then as a lobbyist. Empire paid Vacco $110,000 last year to promote its cause, and he remains on the payroll at $10,000 per month lobbying the Republican-controlled Senate.


In the Albany spirit of equal-opportunity influence-peddling, Empire also retained a pair of prominent Democratic lobbyists to work the Democrat-controlled Assembly: Brian Meara, a favorite of Assembly Speaker Sheldon Silver, is pulling in $5,000 a month, and another Democrat, Al DelBello, former lieutenant governor under Mario Cuomo, is paid $10,000 a month.

Meara came in particularly handy in 2005 when the company needed to smooth things over with the Assembly after ex–Empire Resorts CEO Robert Berman lost his cool at an Assembly legislative hearing. Berman, a Sullivan County businessman who helped launch the push for casinos in the Catskills, became openly hostile when Brooklyn assemblyman and investigations committee chairman Jim Brennan pressed him about Tollman’s continued interest in the corporation and other concerns. “Do you want to talk about jobs and tax revenues and saving Sullivan County? Or do you want to play 60 Minutes?” Berman testified.

Berman was also questioned about Empire’s
dealings with another tribe, the Cayuga Nation in northern New York. At the time, Empire
was claiming to be partners with the Cayuga, although a majority of the tribe’s leaders had accused the company of financing a fraudulent tribal election that put a pro-casino faction in
power—and then jilting the tribe in the bargain.

“Let’s not worry how an agreement came to be,” Berman shot back. “It was a negotiation like any other negotiation. There’s give and take. Decisions were made. Some are good, some are bad. That’s what it takes to make a deal. OK?”

A few months after the hearing, Berman
was quietly replaced as CEO with a veteran casino executive, David Hanlon, who traveled to Albany to make amends in the Assembly.

As for the Cayuga, attorneys representing five of the eight members of the tribe’s governing body—known as the Council of Chiefs, Representatives, and Clan Mothers—filed a detailed letter with the SEC demanding an investigation.
Empire, the letter alleged, had staged “a naked attempt to overthrow the lawful Cayuga government” by backing a group of dissident pro-casino members.

Cayuga attorney Joe Heath said the SEC failed to take action, but shortly afterward Empire dropped the tribe and cut a new deal with the St. Regis Mohawks.

“I have said for 20 years this casino business is a scandal waiting to happen,” said Heath, a veteran of many upstate gambling battles. “There are millions and millions of dollars to be made if you get one of these up and running.”

[


So what’s a tough reform Democrat like Eliot Spitzer doing with this reprobate old-guard Republican crew? Why would an ambitious pol who made his mark by zealously hunting down Wall Street miscreants want to give his blessings to this bunch?

The quick good-government answer is Spitzer’s oft-repeated campaign pledge to bring new economic development to ailing upstate regions. “The governor has said that gaming should be a part of an economic-development strategy, but not an economic-development strategy on its own,” says Spitzer spokesman Paul Larrabee.

Ever since the decline of a score of once famed resorts like Grossinger’s where New
Yorkers flocked in the 1950s and ’60s, Sullivan County has fallen on hard times. Budgets for schools and road maintenance are hard-pressed and, aside from state prisons, there are few decent-paying local jobs. Casinos—particularly if the Monticello Raceway resort is just the first of several, as seems likely if approvals can be won—would pump millions into local coffers.

Part of the deal calls for a direct $15 million-a-year injection from the casino to the county government. The local township of Thompson is slated to get another $5 million annually. Although it sounds like a lot, much of that money will be needed to offset increased local expenses for schools, roads, and infrastructure. Still, the county legislature has repeatedly favored the project.

Under the agreement, the state is due a 20 percent share of casino gambling revenues, a figure that rises to 25 percent after four years. State officials declined to estimate what that’s
worth, but by comparison, the state now takes in about $50 million a year from two smaller Indian-owned casinos near Niagara Falls.

There is also pressure for the project from organized labor, which overwhelmingly backed Spitzer last year. In 2005, when Pataki asked the legislature to consider the possibility of five separate Catskills casinos, state AFL-CIO chief Denis Hughes estimated that the plan could generate some 50,000 union-covered jobs. Further fueling organized labor’s casino appetite, the hotel workers’ union reached a tentative agreement with developers and Indian tribes to allow workers at the casinos and attendant resort hotels to win union contracts. (Despite
organizing efforts, Connecticut’s gambling resorts have remained nonunion.)



But another part of Spitzer’s casino calculus—one that’s harder to quantify—is politics. For one thing, there’s the support Spitzer picked up during the campaign from many Pataki diehards. Faso, a former Assembly minority leader and a rock-ribbed fiscal conservative, had every right to expect backing from Republicans who had prospered during Pataki’s 12 years in office. But by the time Faso won the nomination, many of them were either nowhere to be seen or spouting GOP heresy by touting Democrat Spitzer’s talents.

Foremost among the apostates was Alfonse D’Amato, who created Pataki’s candidacy out of whole cloth back in 1994 and remains the single most powerful figure in the state party. As early as May 2006, D’Amato was openly saying that Spitzer would make “a great governor” and that the hard-driving ex-prosecutor was too far ahead in the polls for anyone to catch him.

D’Amato did Spitzer two other solids. He helped drive William Weld, the moderate former Massachusetts governor, out of the race by denouncing Weld’s involvement with a for-profit-college scandal in Kentucky. The Fonz also got his Long Island allies to back Faso at the GOP convention—even though the conservative was widely considered a weak candidate.

D’Amato has his own casino ties. At one point, he represented a rival to Empire Resorts and helped sweet-talk the Mohawks into briefly teaming up with his client (the tribe later defected back to Empire). But while D’Amato has no current public link to the pending development at Monticello, he is so closely connected to the group around Empire and the Mohawks that one top Pataki aide privately referred to the casino plan as “a retirement plan for D’Amato’s people.”

Spitzer also got royal treatment from Republican Jeanine Pirro’s attorney general campaign. Pirro’s TV ads depicted Spitzer as a “fighter” and role model whom she would emulate if elected. The ads made Faso cringe, but there wasn’t much he could do, since the mastermind of Pirro’s campaign was none other than Pataki’s favorite adviser, Kieran Mahoney.

And Spitzer got an early and large contribution from the wife of builder and Empire partner Louis Cappelli. Campaign records show that Kylie Travis donated $25,000 to Spitzer in 2005 (the couple were also among Pirro’s biggest benefactors, pumping $70,000 into her losing campaign).

All in all, by the time Spitzer was ready to consider the casino plan, there were no hostiles on the horizon at Monticello, only friendlies.


Whatever his rationales, the governor’s announcement quickened the hearts of Empire Resorts’ shareholders. The day after Spitzer’s February 19 endorsement, Empire’s stock price jumped from $8 a share to a three-year high of $12. Within days, several Empire directors exercised long-held options to purchase stock, some for as low as $2.12 a share, SEC filings show. The price settled down to about $9 but should have stayed up around $12, according to casino stock analyst Justin Sebastiano of Nollenberger Capital Partners, who has touted the company as “undervalued.”

[

“There is a lot of money to be made there,” says Sebastiano. “They are going to generate significant revenues.” Once a hotel goes up nearby, the price should go up another $4 to $6, according to Sebastiano. As for the pending approval by the Department of the Interior, “it’s a question of when, not if, ” he says.

Not everyone’s so sure. “This is far from a slam dunk,” says Kathryn Rand, a North Dakota
law professor and gaming expert who is co- director of the Institute for the Study of Tribal Gaming Law and Policy.

Just a week prior to Spitzer’s announcement, Associate Deputy Secretary of the Interior James Cason notified 35 tribes that new rules may sharply limit any approvals of off- reservation
casinos. The letter was similar to one that Cason sent in December to Pataki concerning his agency’s decision to sign off on the environmental aspect of the proposed Monticello casino, issuing a “finding of no significant impact.” But Cason essentially told the governor not to get too excited.

“Governor, please note that we share the concerns that many have expressed about the implications of off-reservation gaming,” he wrote.

Those are also the views of Cason’s boss, Secretary of the Interior Dirk Kempthorne, a former Idaho governor who has been steadfastly opposed to the practice. “I think he’s worried it’s a slippery slope,” said Steven Light, Rand’s co-director at the gaming institute, who counts 50 separate off-reservation proposals now pending. “If Kempthorne says yes to one, there’s a precedent set to sign off on others. Then he has to provide a rationale that the other 49 are different,” says Light.

There’s also a delicate little problem for the Bush administration in the form of Jack Abramoff. The notorious GOP lobbyist and con man hoodwinked casino-seeking tribes out of hundreds of thousands of dollars, something Republicans would rather not remind voters about. “The Abramoff scandal has pretty much colored how Congress and the administration look at this,” says Light.

Another big hurdle is an environmental lawsuit filed in February by the Natural Resources Defense Council and three local groups against the Interior Department. The suit charges that the agency violated its own rules by not compelling Empire and the Mohawks to carry out a full-scale environmental-impact study. The casino is a “massive project that would be out of scale and out of character” with the region, the suit charges, bringing some 6 million annual visitors to a tiny village with a current population of 6,300.

Empire Resorts has been working hard to counter the environmentalists’ claims. Recently the corporation announced that its proposed gambling structures would be the first “green” casino in the Northeast, constructed with “environmentally friendly systems.”

How confident is the company that it’s finally in the home stretch? The question was one of several put to Empire’s vice president for communications, Charles Degliomini. “Sure, let me get some information together and get back to you,” he said. But he didn’t. Degliomini, a longtime D’Amato associate and former co-worker and close friend of Charles Gargano, was not heard from again.

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The Fonz’s Pitch

The first time Transport Workers Union Local 100 president Roger Toussaint sat down with Peter Kalikow was a get-to-know-you meeting in Kalikow’s midtown skyscraper at 101 Park Avenue in early 2001. Both men were newcomers: Toussaint was elected in December 2000, and Kalikow, a real estate mogul, had been named Metropolitan Transportation Authority chairman by Governor Pataki just a couple of months earlier. Along with Toussaint was union secretary-treasurer Ed Watt.

Not long after the three men started chatting, according to sources familiar with the meeting, one of Kalikow’s neighbors popped his head in the door. Ex-senator Alfonse D’Amato, who has his own suite of offices on the building’s 25th floor, said he just wanted to say hello. According to the sources, Kalikow seemed to think nothing was amiss as D’Amato proceeded to tell the men that he had once represented a local of the Transport Workers Union on Long Island, and suggested that he could be helpful to the newly elected officials as well. It wouldn’t have been the first time D’Amato represented clients with business before the MTA. A D’Amato client won a huge subway car contract, and the ex-lawmaker once earned $500,000 for helping MTA’s downtown landlord. Currently, D’Amato lobbies the MTA board on behalf of the subway supervisors association, records show.

When Toussaint reported the overture to union officials, some advisers urged him to hire the influential lobbyist. Toussaint, however, passed on the offer. “It didn’t feel right,” a source said. D’Amato and an MTA spokesman declined comment.

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Fixer Fonz

Dominick Carter, the cuddly inquisitor on NY1, went after one of his own recently, grilling former senator and forever fixer Al D’Amato on Wiseguys, the show that regularly features the Fonz, Ed Koch, and Mark Green. Paid to comment on the news, D’Amato had become the news himself, and Carter had to ask him about the $500,000 he was paid to lobby MTA officials in connection with the authority’s catastrophically expensive new headquarters.

“My fee was $500,000,” acknowledged D’Amato, explaining that “a financial institution” that was completing a $230 million refinancing of the building paid him. “I did call. And indeed we were able to get the process moving so that some of the encumbrances to the sale were removed. But that’s a fact. Yes. And I do that.”

“But Senator,” dogged Dominick continued, “$500,000 for one telephone call?”

“Uh, I didn’t set the fee. The people came to me and set it. And, yes, indeed, I’ve made $13 million for putting together two different companies. And that’s what I do.”

Fifteen years ago, when U.S. Attorney Rudy Giuliani asked Stanley Friedman, the state’s most powerful Democratic boss, if he’d made $10,000 for two phone calls, arranging a city lease for a client, Friedman snapped that it was for one call, a boast that pushed the jury to convict him. Despite Alan Greenspan, that’s how badly inflated the price of influence is.

But D’Amato did not stop with his own boast of a $13 million fee. He wanted to show how open he was about his insider hustling and, even without a question from Carter about the collapse of the lobbying bill in Albany just four days earlier, he launched into a cynical cheer for reform. “I have no objection,” he declared. “I have no problem if the state wants to cover—and the legislature in their wisdom—outside agencies like the MTA, and say that if you do lobby that you’ll have to report that. No problem.” Pointing out that he discloses his clients under the current law—which only applies to legislative acts—D’Amato said, “If they see fit to expand it, then so be it, and I’ll comport with the law.”

The camera did not catch D’Amato winking, but he might as well have. His good friends in Albany, George Pataki and Joe Bruno, handpicked for their current posts by D’Amato back in 1994, had sabotaged reform just in time for D’Amato to endorse it. They combined to kill a bill that Frank Padavan, a Republican state senator from Queens, and Pete Grannis, the Manhattan assemblyman, had essentially agreed on, ostensibly with the support of their respective leaders. Both told the Voice that their bill explicitly covered the infamous D’Amato call.

But at 4 a.m. on June 20, Pataki suddenly pulled a poison pill substitute out of the air, and put it out on the floor of the senate. Cluttered with loopholes and caveats, the bill arguably would not have required disclosure of the D’Amato bonanza, especially with its language exempting “vendor disputes,” which is precisely what led to D’Amato’s fee. Indeed, since the Pataki bill only restricted lobbying of “state agencies”—unlike the Grannis bill’s reach to “any action by any public official”—it’s unclear if authorities like the MTA were included at all. But even if D’Amato’s call was covered by the Pataki bill—and Republicans like Padavan say he’s not sure it was—the bill was designed to kill reform efforts and it inevitably did.

Pataki’s bill would have undermined the lobbying commission, forcing wholesale changes in a body that has aggressively enforced the limited laws that exist and adding the requirement that the new commission, with twice as many gubernatorial appointees, had to establish “intentionality” to penalize lobbyists who violate the statute. It also would have introduced the worthy but unconnected issue of judicial reform, putting an army of Pataki appointees in charge of a task force to study it. In other words, the bill was written to dislodge a better one, and was so haphazardly put together that its sudden sponsor, John Flanagan, the newest state senator from Long Island, was forced to handwrite a legal memo explaining it on the senate floor.

Bruno, who overthrew the prior majority leader after another series of well-reported D’Amato calls, was in such a rush he was forced temporarily to withdraw the surprise Pataki bill at around 4:30 a.m. after Democrat Liz Krueger raised a point of order. Once Krueger reminded the senator who was serving as acting president that “rules require a sponsor’s memo be available,” the president said that it was his “understanding that there is a memo as a work in progress on the bill.” Finally Bruno asked that the bill be “laid aside temporarily” while Flanagan scribbled out a virtually incoherent memo.

With the bill brought back around 5 a.m. as virtually the last bill of the senate’s 2003 session, Flanagan stumbled through several Krueger questions. He conceded that the bill was “a little more limited in scope” than the Grannis bill, which had already passed the assembly, conceding that it did not cover, for example, lobbying that was connected to executive orders. Having already announced that the senate was going home that morning, Bruno’s rebuff of the Grannis bill and passage of its Pataki substitute finished lobbying reform until the 2004 session, or possibly a special session this fall. By the time D’Amato made his on-air endorsement, it was already clear he could keep on dialing secretly for dollars for another few months.

Don’t expect Pataki or Bruno to confess that they and their mentor Alfonse had a good laugh together over the fiasco. But one measure of how orchestrated it may well have been was the testimony in early June of Peter Kalikow, the developer who’s now MTA chair, at an assembly hearing called by Richard Brodsky, whose investigation put D’Amato’s fee center stage. Kalikow, who is so close to D’Amato that he used Kalikow’s Manhattan apartment as his legal address when he entered the Senate in 1981, rejected Brodsky’s attempts to get him to criticize the D’Amato call or support lobbying reform.

“I don’t know what the facts are,” said Kalikow, who was D’Amato’s finance chair throughout the Senate years. “But I can’t just say that $500,000 is wrong because we have to decide what it gets for us. We spend much more than that in litigation fees.” As usual, the two lifelong friends were on precisely the same page. On NY1, the only defense D’Amato offered was that his fee might’ve saved the MTA from “a very costly suit” that would’ve “cost the MTA a lot of money.”

Every time Brodsky tried to get Kalikow to back any specific lobbying reform, the cagey Kalikow would duck and weave, saying things like “I don’t know whether this becomes more cumbersome than the problem it needs to solve.” Asked about making contingency fees like D’Amato’s illegal—80 percent of his half-million-dollar fee was paid as a bonus because he got the MTA to back off its objections to the refinancing—Kalikow said, “Coming from the business world, I think people should be rewarded for success.”

Brodsky revealed that the MTA’s own reorganization bill has a brief disclosure requirement, followed by “30 lines of exceptions,” and that Kalikow’s staff conceded it would not cover the Alfonse call. Since D’Amato’s lobbying firm is a tenant at 101 Park—the office tower Kalikow owns and works out of—it’s pretty hard to imagine that they never discussed D’Amato’s supposed commitment to lobbying disclosure, but maybe the two old friends just disagree.

Padavan, a straight arrow on this issue whose proposed reforms have been even stronger than the assembly’s, told the Voice that he believes the senate would’ve passed his bill had it ever come to the floor. He delicately tries to take seriously Pataki’s interest in judicial reform but says he “would’ve liked to see the governor take my bill and tie it into judicial reform,” adding, “I don’t know why he didn’t do that.”

Maybe because it might’ve become law.


Research assistance: Michael Anstendig, Zoe Alsop, Ross Goldberg, Phineas Lambert, Naomi Lindt, Brittany Schaeffer, and Jessica Silver-Greenberg

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Lies, Damned Lies, and Campaign Promises

The scandal-tinged governorship of George Elmer Pataki is now caught in its biggest scandal of all—how he, apparently to ensure his election to a third term last year, kept from the voters the gravity of the state’s financial situation and thus worsened the crisis by not taking early emergency measures to deal with it.

Some good-government watchdogs think this is a case of knowing malfeasance of office for personal gain, but in the real world, no one expects any prosecutor to seek accountability through the justice system. In any event, it is a story of how, to protect his political future, Pataki hustled the state of New York—through sleight-of-hand and a campaign trail of illusions, evasions, and the more than occasional prevarication—into the biggest budget shortfall in New York history. As all of us know from recent banner headlines, the Pataki team is now $11.5 billion short in a budget of $90 billion. That spells severe financial pain and sacrifice for millions of New Yorkers, especially those on the lower branches of the money tree.

George Pataki knew how serious the state’s financial condition was nearly a year ago as he campaigned for a third term, yet he told the voters everything was hunky-dory. He gave them his vow there would be no new taxes and soothed them with assurances that the budget-gap projections they were hearing from others were wildly exaggerated.

Last September, two months before Election Day, the majority leader of the state senate, Joseph Bruno, like Pataki a Republican, said that his reading of the numbers put the budget gap already in the $10 billion range—and climbing. Pataki scoffed at Bruno’s projection, telling Daily News reporter Joel Siegel: “I don’t know where it came from. Joe is a wonderful leader. He doesn’t always do thorough research before putting out an analysis.”

Bruno’s forecast was of course right on the money. And now Pataki and his spinners are scrambling mightily to distance themselves from the anger of voters who feel betrayed. These voters will be hit with huge state and local tax increases that they now know could have been significantly reduced if only the governor had acknowledged the crisis and taken early steps, such as a freeze on spending and hiring, to lessen the damage.

When reporters would ask Pataki during the campaign to explain the disparity between his rosy picture and the dire warnings of his political opponents and independent analysts, he would most often duck the questions. Even when he did respond, he would offer no details and merely say that his figures had come from his budget “professionals.” He would also immediately say he was “proud” of his record.

In fact, this was Pataki’s mantra throughout the campaign when asked about any scandal or controversy: He would state his pride in his accomplishments in that particular policy area and then say that all past decisions were made by the “professionals” in state agencies. It was almost as if he was setting up his own appointees and employees as possible scapegoats should he need a defense later on—say, if legislative hearings or even grand juries were convened. Poor man—he was only doing what the “professionals” told him to.

The most recent controversy, just this past week, has escalated to fever pitch—the charge by both the state and city comptrollers that the Metropolitan Transportation Authority, a rarely scrutinized adjunct of the governor’s office, had diddled with its books to force an increase in the bus and subway fare this year instead of waiting until next year, when the reserves would actually have been used up. The real mystery—still unexplained by MTA chairman Peter Kalikow, a privately wealthy, major contributor to Pataki campaigns—is how and why the agency declared itself to be in surplus before the gubernatorial election, and then, as soon as Pataki had coasted to victory, declared the surplus to have remarkably disappeared—thereby necessitating a fare hike. How magical.

As in most of this governor’s unorthodox dealings, money is at the heart of it, usually money that goes into his campaign chest in return for lucrative state contracts and other favors. Of course, Pataki denies there is any connection. His wife, Libby, earns $200,000 or more a year from part-time consulting contracts given to her by companies that either receive state contracts or give major campaign money to the governor. She thus earns more than the governor, whose salary is $179,000.

The pattern of Pataki’s conduct would seem to be tailored after that of his mentors, chief among them former U.S. senator Alfonse D’Amato and Charles Gargano. The latter is a master campaign fundraiser who performed this service for D’Amato, who then bequeathed him to Pataki, who soon made him the state’s economic development czar, through whom all major infrastructure contracts are now funneled, including the billions of federal dollars for the rebuilding of ground zero. Through their long political careers, both D’Amato and Gargano have gained reputations as men who never came upon a conflict of interest that they couldn’t turn into a windfall.

I mention all this only to show that the governor has some outstanding role models.

To return to the state budget, let us examine how the charade was carried out. In his first two terms, Pataki used the economy’s boom years to build up reserves and serve his political career goals. Because of the boom and the resultant surge of tax revenues, he was able to lower tax rates yet increase spending to please a wide range of voter blocs. He balanced the budget each year, a requirement under the state constitution, using lots of gimmicks and fancy juggling and one-time, non-recurring funds. With all this good fortune and prestidigitation, he was also able to lay aside as much as $4.1 billion in reserve, “rainy day” funds.

But by the time the state’s last fiscal year began, on April 1, 2002, the stock-market bubble had burst, the recession was on, and September 11, 2001, had sent New York City into shock. The rainy-day reserves were already down to $2.6 billion, and by Election Day, tax revenues were shrinking so fast that the nest egg was gone and a budget chasm was widening. With Pataki hiding the extremity of the situation from ordinary voters and taking no steps to curtail his lavish state spending, the mess was on its way to becoming the worst fiscal crisis in New York history, even more severe than the one in the mid 1970s. There was a governor in Albany then, Hugh Carey, who—whatever his flaws—did not hide or run from a problem.

Knowledgeable political operatives and scholars around the state were astounded by Pataki’s strategy of denial. Two months before the November election, for example, Gerald Benjamin, a highly regarded author and political science professor at SUNY-New Paltz, and a Republican, told reporters: “There’s going to be an extraordinary crisis. Nobody disagrees who pays attention and is not vested in one of these campaigns. It’s going to be a very big deal. The localities are going to turn to the state, and the state is going to be in extremis. . . . This deficit should be the biggest issue in the election, but nobody wants to touch it. There is no credible plan for this.”

Pataki’s only plan was his vow that there would be no new taxes. “This is not going to happen,” he said. “Absolutely not.” This pledge was grossly misleading, because his proposed budget for fiscal 2003-2004 calls for $1.3 billion in new “assessment” hikes, which are taxes. It also includes $6 billion in one-shot revenues, a gimmick he had excoriated in earlier governors’ budgets and said he would never use.

He has kept insisting that he easily handled a $5 billion gap when he first took office in 1995, so this one would not be any more daunting. This one, however, was strikingly different. Pataki had spent money like a tipsy sailor, handing out election-year goodies all over the state. He’s been doing this for the last five years, as if the stock-market mania was never going to fizzle. Well, it fizzled and crashed in 2001 and remained in the tank through election-year 2002. It would have been hard for Pataki to miss the carnage.

After the election, Pataki’s pretend-game collapsed quite suddenly, for the true budget numbers erupted into public view like a dam breaking. Now it was clear to everyone that the gap for the fiscal year that ended March 31 would be around $2 billion and the one for the year that began April 1 (fiscal 2003- 2004) would be at least $10 billion. Yet the governor has stuck with his “taxes are job-killers” platform and, with the crisis worsening, is still shouting it loudly every day now, with the vigorous help of his favorite newspaper, Rupert Murdoch’s New York Post, always in the “right” column.

It’s a bully campaign against the two legislative leaders, Bruno in the Republican-controlled senate and Sheldon Silver, speaker of the Democratic assembly. The goal is to build public pressure to get them to bend to Pataki’s demands for shrinking the budget by making deep cuts in vital aid to localities—which would affect everything from public safety to schools to health care to garbage pickup to road repair. He says that if the legislative leaders pass any large increases in “broad-based” taxes, he will veto them. The leaders would then either have to override his vetoes—and thus accept any voter backlash from the new levies—or go along with some negotiated compromise.

Meanwhile, in Washington, President Bush not only wants no new federal taxes but demands big reductions in the present ones as well. Which raises an obvious question: Has Pataki—who has long thirsted for a senior post in the Bush administration, with some backers even talking about the vice presidency—been playing all these budget power games primarily to curry favor with conservative Republicans and the missionary good-versus-evil president? It’s hard to know, but whatever his motives, the creature the governor has hatched walks and talks and froths like insanity.

Did Pataki really believe that he could get away with standing before the television cameras after September 11, looking caring and patriotic with a giant flag behind him, while at the same time lying baldly to the voters about a gut issue as serious as this one—and not face a justifiably enraged citizenry when they found him out? For if the president is cutting taxes and Pataki succeeds on his no-new-taxes tear, then local governments will have to come up with the money by raising their own taxes astronomically—property and school taxes among others.

In the short term, Pataki has gotten away with his flimflam. He is a sharp and cunning politician. His ploy of staying silent and giving vague responses on touchy subjects like the budget was noted and written about by reporters, but overall the press never did hard analysis on the numbers or explained what they meant for taxpayers. By Election Day, virtually every major paper in the state had endorsed the governor. Reporters—and editorial boards—are supposed to be able to add and subtract.

Ultimately, the fiscal calamity simply didn’t strike a chord with the voters. Maybe they were too distracted by the terrorism of 9-11 and their own immediate pocketbook distress from an unstable economy that had made thousands jobless. And maybe they’ve lowered their expectations of elected officials to near zero.

Beyond all this, state government has always been a maze to the average citizen, with so many of its decisions made behind closed doors and rarely examined by independent overseers.

When I write that Pataki used illusion and denial to disguise the budget crisis, I am not suggesting that no governor or legislature ever juggled the figures before to balance the state budget or used gimmicks and one-shot revenues. I covered Albany for five years in the 1960s when Nelson Rockefeller was governor, and those tactics are as common in Albany as fleas on a junkyard dog.

I remember the scene one year, at the annual budget briefing for the press in the rare-art-filled governor’s mansion on Eagle Street, when Rockefeller, during his presentation with charts and an easel next to one of Picasso’s Guernica tapestries, said he had solved a particularly tricky fiscal problem with an infusion of $75 million. Where in the budget did you get the money from, reporters asked. Nelson smiled and said his budget director, T. Norman Hurd, had discovered the treasure in some obscure fiscal cranny. At which point Charlie Dumas, the AP bureau chief, a skilled reporter who was also incurably puckish, called out to the multimillionaire: “Come on, governor. Where did you find it? Did you send an old suit to the cleaners?”

But Pataki, with his illusionist games, has gone light-years beyond the usual Albany higgery-jiggery. He has created an honest-to-goodness crisis.

Oddly, one opposite of the word magic is tragic. Our alchemist governor has spun his magic with mirrors and doublespeak. The end product is a tragedy. And if any reckoning comes out of this mess, it could bring him down.


Research assistance: Jennifer Snow

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Bad Policy, Big Bucks

Every Gubernatorial poll makes the economy the top issue, every economist knows that one way a governor impacts on jobs is by influencing the price and reliability of power, and every analyst of George Pataki’s energy policy, from the right and left, has reached the same sad conclusion: It’s a disaster. Yet no one’s talking about it.

The governor’s deregulation scheme went into effect in late 1999, and energy prices in New York City and Rockland and Orange counties spiked 43 percent by the summer of 2000—one of the coolest in history, when rates were dropping in neighboring states. To stabilize prices and prevent outages in 2001, the State Power Authority had to rush to the rescue, spending $500 million to instantly add 400 megawatts to the city’s generating capacity, a shocking admission of the almost instant failure of Pataki’s “let-the-markets-rule” energy ideology.

The most recent statistics from the Energy Information Administration indicate that statewide costs are 70 percent higher than the national average, behind only Hawaii, and far worse than the 50 percent mark they hit when Pataki was elected in 1994. Billed also as a spur to competition, deregulation has instead led to little consumer choice, with even the number of investor-owned utilities dropping from seven to four.

While the governor’s media allies are quiet now, a Daily News editorial blasted the plan just two years ago as “dopey,” accusing it of “electrocuting the state’s economy.” In March 2001, the Post‘s “Electric Shock Treatment” editorial pointed out that when “the state began implementing a deregulation plan that required utilities to sell off their existing plants to independent power producers,” Pataki “crowed it would lead to more competition and lower prices, but the opposite proved true.”

Assemblyman Paul Tonko, the upstate Democrat who was once an engineer at the Public Service Commission and who now chairs the energy committee, issued a report last week that sounded an alarm, though the Albany Times Union and The Syracuse Post-Standard were the only papers to cover it. Revealing that a third of the state’s generating capacity is now owned by junk-bond companies, several “in danger of bankruptcy,” Tonko contended that Pataki’s “radical deregulation policies, which encouraged complete divestiture, have left New Yorkers at unique peril,” compromising “the reliability of the electric system.” While the capital crisis is national, said Tonko, it has, when combined with Pataki deregulation, put “consumers at greater risk than their counterparts in other states.”

Warning that “the financial community is running away” from the merchant generating companies that now control much of New York’s power “on a scale not seen since the Great Depression,” Tonko fears that plants will close or won’t be built, noting the recent suspension of construction on a plant in Athens. With even the New York Independent System Operator—a new entity created by state regulators to oversee electric markets—saying that the system is in “persistent crisis,” Tonko concludes that New York consumers may well wind up paying more “for the privilege of their lights going out.”

That double whammy is “New York’s Perfect Storm,” the title of Tonko’s ignored report, which faults the governor for rushing deregulation through by administrative fiat, without any legislative involvement, “before workable wholesale and retail markets were in place.” Of course, the advantage of doing a deal of multi-billion-dollar proportions alone is that there’s only one place to go for those who want to buy influence in the process. The one commodity this scheme did generate was lobbying and campaign cash, energizing the governor’s gang—from his top political advisers, Kieran Mahoney and ex-senator Alfonse D’Amato, to his former law partner Bill Plunkett, and even to the Public Service Commission chair who crafted it, John O’Mara.

This is the story of how bad policy earned big bucks—including at least $376,505 for the re-election campaign of the governor who enacted it, collected from the disgorging utilities and the acquisitive new merchant generators. With New York’s new generators—like Mirant, Dynergy, Reliant, AES, Entergy, Orion, Sithe, Calpine, Constellation, PSEG, and Pacific Gas & Electric National Energy Group, the California utility at the core of its crisis—contributing $177,750 to Friends of Pataki and the state GOP, the lobbying association they put together, the Independent Power Producers PAC, kicked in another $12,250. One producer who was vice chair of the PAC, Michael Tucker of Mercer Companies, donated a remarkable $19,880, adding another $23,100 to the assembly and senate Republican committees, and selling off three of his plants after deregulation.

And the utilities that divested their plants at exuberant prices also joined the Pataki sweepstakes, with upstate Energy East donating $10,950 through its Energy Action Fund and its directors, while National Grid and Niagara Mohawk (which merged) added $71,575, Rochester Gas & Electric $6900, and Con Ed another $16,750. Another major beneficiary of Pataki energy policies, Keyspan, which manages the Long Island network, has kicked in $59,200.

[

This tally doesn’t include donations from the Albany lobbyists for the industry who are tied to the governor—like Davidoff & Malito, Bolton St. John’s (whose partners include Armand D’Amato, the senator’s brother), and O’Mara, who is now an attorney for at least one of the utilities he deregulated, Niagara Mohawk (NiMo). In addition to directly representing NiMo as a registered lobbyist, O’Mara has a consulting agreement with a Syracuse law firm, Hiscock & Barclay, that lists NiMo as a client. The firm has a state contract to handle Indian land claims, and O’Mara is paid to represent the governor in any casino negotiations. Plunkett, whose Westchester law firm once included Pataki as a partner, wound up representing Entergy Nuclear, which bought two of the state’s nuclear plants at 70 percent of book value.

Even Mahoney, the campaign consultant who is now running his third consecutive Pataki campaign, joined the feast, forming a lobbying firm called Mercury Enterprises with Al D’Amato, Pataki’s pollster Greg Strimple, and ex-D’Amato aide Kirill Gonacharenko. Their only registered client in New York until this April was Energy East, perhaps the state’s biggest beneficiary of deregulation, whose skyrocketing return on equity has launched it on a recent buying binge, acquiring utilities all over the Northeast, including Rochester’s.

Another D’Amato company, Park Strategies, represented Florida Power & Light, which signed a long-term, no-bid purchase agreement with the state’s Long Island Power Authority to build a small plant in Far Rockaway after Enron pulled out of the deal. A third D’Amato lobbying firm, D&O Consulting, is a partnership with O’Mara, who’s been closely associated with D’Amato since the first senate election in 1980. While O’Mara represents NiMo in his own name and the name of his Elmira-based law firm, Davidson & O’Mara, D&O does not report representing any energy-related clients.

Mercury, which lists Mahoney as its chief administrative officer, was retained by Energy East in 1999, more than a year after its original deregulation contract was negotiated with O’Mara and after D’Amato was defeated in 1998. The contract called for annual payments of up to $120,000, but also provided for “additional compensation”—to be negotiated—”regarding activities that Consultant may undertake in connection with possible acquisitions and/or mergers.”

Energy East is not answering any questions about what Mercury did for it, but the lobbyists’ state filings listed D’Amato and his son Christopher, and indicated that they lobbied the PSC throughout the period that the commission was considering both the Rochester merger and a new five-year pricing plan. A month after the merger and plan were approved on February 26, Mercury’s contract was terminated. Not only did the PSC approve the merger, it allowed Energy East’s wholly owned subsidiary, New York State Electric & Gas, to take a 15.5 percent return on equity, far more than the 10.3 percent simultaneously allotted to Central Hudson, a similarly situated upstate utility.

While the plan did result in a rate drop this year, its opponents, including Nucor Steel, charge that some rates will go up in January, right after the election, and that the agreement locks in artificially high prices and “extraordinary” profits for five years, longer than most PSC settlements.

The Tonko report also raised questions about another crucial consequence of the merger approval—Rochester, the state’s best-run utility and the only one to insist on retaining control of their plants in deregulation, was pushed by the PSC to divest. The commission, chaired by Maureen Helmer, a longtime staffer for the Republican senate and assembly who was groomed for the PSC chair as O’Mara’s counsel, ignored all the lessons apparent from the earlier sell-off of plants. Ratepayers, Tonko insists, “will be somewhat shielded from the crisis by [Rochester’s] retaining its current corporate structure,” controlling generation as well as transmission.

The other curious state action taken during D’Amato’s representation of the company was SUNY-Binghamton’s decision to pay $6.1 million for a 50-year-old Energy East office building located near its campus. University president Lois DeFleur, an Energy East director who lists the company as her only individual stock holding on state filings, says she recused herself on the no-bid deal, though her counsel concedes he kept her informed about it. Rejected at first by the PSC, the state comptroller’s office, and the attorney general, the deal was revised and eventually pushed through on an emergency basis last June.

A letter from Assistant Attorney General Henry DeCotis two days before the deal’s approval objected to paying $144,000 more than the value determined three years earlier by an appraisal DeCotis found unacceptable. It also assailed the special terms of the deal, which permit Energy East to continue using both the office and its parking space for $50 a year, and so constricted the university’s parking access that it “might well make the building unmarketable.” “What is the value of an office building in a suburban setting without adequate parking?” DeCotis plaintively asked.

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Strangely, the gravest intrigue about the energy deals of this administration involves a telecommunications company based in Syracuse that no longer exists, Telergy. Founded in 1995, it, too, was represented by D’Amato. O’Mara became a “senior adviser” to the company, and a director with an option to buy 30,000 shares, a few months after he left the PSC in 1998. Pat Barrett, the former head of the state GOP who’s donated $261,600 to Pataki and the party since 1998 (including his wife’s donations), was the president until he, O’Mara, and Democratic National Committee chair Terry McAuliffe, who was also an investor and director, resigned in August 2001.

The company, which built a network of more than 2500 miles of fiber-optic lines, was liquidated, with over $600 million in liabilities, this January. Its business plan utterly depended, from the beginning, on its ability to join forces with utility companies so it could obtain the rights to build its network along the poles and underground transmission units that the utilities controlled.

Not only did Telergy sign exclusive contracts with the very utilities O’Mara cut individual deregulation deals with at the PSC—at least three utilities became Telergy partners. NiMo and Telergy joined forces first, with NiMo getting 25 percent of one Telergy subsidiary in 1996, and eventually investing $44 million that it had to write off when Telergy went belly-up. Two NiMo executives sat on Telergy’s board.

Con Ed and Energy East also formed partnerships with Telergy in 1998, with Energy East a 50 percent owner of one subsidiary, Telergy East. These arrangements occurred just as O’Mara was leaving the PSC on April 15—right before he was listed as a Telergy director. O’Mara was at the time perceived as a continuing power in Pataki circles, with his ex-aide Helmer at the PSC helm and the governor naming him to chair his judicial screening panel.

Indeed, when Con Ed eventually broke with Telergy, it paid a stiff price at the PSC, an apparent indication of O’Mara’s and the company’s influence there. The commission found against Con Ed in May 2000, agreeing that Telergy’s allegations of Con Ed’s discriminatory and anti-competitive actions against it “generally have merit,” that Con Ed “likely engaged in activities that caused undue delays” in granting Telergy access to its transmission facilities and rights-of-way. Con Ed was forced to comply with a Telergy/PSC-determined work schedule.

In June 2001, just months before Telergy collapsed, the PSC again found against Con Ed, requiring it to give Telergy a million-dollar credit even though Telergy was $4 million in arrears to the company. “Con Ed bears a heavy burden of demonstrating that its policies are reasonable and it has failed to carry that burden,” Helmer and the commission ruled. The rulings—which preceded Telergy stiffing Con Ed for $13.8 million—were seen by industry insiders as confirmation of Telergy’s favored position within the administration, one reason why the utilities dumped money into it in the first place.

Telergy, which also gave $2500 to the Pataki campaign, won contracts from the State Transportation Department to install fiber optics along the Thruway, the Northway, and other state highways, as well as a $1.3 million no-bid award from the State Office of Technology. It also had $4 million in contracts for high-speed service with the Office of Court Administration, $3 million with Parks, and a $304,000 deal with SUNY.

The Telergy intrigue may well be the invisible undergirding of the deregulation arrangements that have done so much damage to the state’s energy market, a nest of interlocking relationships. NiMo was allowed from the outset to pass through increased power costs to industrial users, Con Ed to pass through all costs. NYSEG’s initial deal allowed it to set profit records that hit 40 percent, and to hide all its earnings from plant sales in the coffers of its parent, Energy East.

One of the first official acts of the brand-new Pataki regime in 1995 was to shut down the state’s energy office. The Times has reported that no state agency had the authority to issue environmental permits for new plants until 1999, and that the Pataki team “scaled back its energy conservation program, once the country’s most aggressive, by more than 70 percent.” The PSC under Pataki ended public rate hearings, and only does confidential pricing settlements with utilities.

The administration is so in league now with the new generating companies that John Cahill, the governor’s secretary, helped install his own longtime deputy, Gavin Donohue, as the head of the Independent Power Producers, the lobbying group that represents them. Donohue, like O’Mara, had no prior energy experience before taking a key job, but he told the Voice there was “no undue pressure” on the IPP to pick him, and that his environmental background more than compensated.

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The collusive contagion that has gripped state government since George Pataki took office has its costs—in nursing and adult homes, as the Times has shown in painful detail this year. It is also a threat to the vitality of the state’s economy, which requires that its power be priced fairly and provided reliably, not jeopardized by the agendas of lobbyists and leeches. A governor who tells us every day how proud he is of what his administration has accomplished has in fact put the state on crisis watch, with its electric lifeline perilously uncertain.


Research: Sandy Amos, Yi Chen, Bobby Smiley, Will St. John, Clementine Wallace

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The Louima Prosecutor

The breathtaking Louima reversals—reconstructing the Blue Wall of Silence—require that George Pataki withdraw his nomination of Roslynn Mauskopf as U.S. Attorney in Brooklyn, the office that faces the daunting challenge of achieving justice in that case and in the recently overturned conviction of Yankel Yosenbaum’s alleged killer, Lemrick Nelson.

If Pataki will not act, Senator Chuck Schumer, who chairs the judiciary subcommittee that reviews these appointments and told the Voice last week he was “troubled” by Mauskopf’s lack of federal prosecutorial experience, must send her name back to the Bush White House. Schumer has just assembled a judicial screening committee of 14 lawyers—including Loretta Lynch, the former U.S. attorney who oversaw the Louima prosecutions until last year—to make recommendations to him about New York appointments. That committee is scheduled to interview Mauskopf next week.

The U.S. attorney must decide whether to reargue the Louima decision before the full Court of Appeals, take it to the solicitor general for appeal to the U.S. Supreme Court, retry Charles Schwarz on the assault charge, or re-indict all three cops for lying to state and federal investigators. Once these decisions are made, he must have the experience and commitment to make them stick. Alan Vinegrad, who personally tried the Louima and Nelson cases, has been the acting head of that office since Lynch left in May 2001. A coalition of minority clergy and leaders, led by Andrew Young and Fernando Ferrer, is now reportedly petitioning Schumer to allow Vinegrad to remain until some of these critical matters are concluded.

Mauskopf, who was a prosecutor in Manhattan District Attorney Robert Morgenthau’s office for 13 years and has been Pataki’s inspector general since 1995, would be the first U.S. attorney in Brooklyn without any credentials as a federal prosecutor in at least the last 30 years. The résumé she submitted to Schumer does not specify a single significant case put together by her IG office, which has been faulted in both news accounts and a state audit. Other than assisting in an ’80s garment-center prosecution led by Eliot Spitzer, who has since become the state attorney general, she lost her only other major case as a Morgenthau aide, when a 1994 jury acquitted boxer Ray Mercer on charges of trying to fix a heavyweight fight.

Zachary Carter, who was U.S. attorney when the Louima charges were initially brought, told the Voice that “it wouldn’t seem to be a close question” that, in this post-reversal climate, prior federal experience would be a “substantial advantage” for anyone running the office. Named last week by Mayor Bloomberg to chair his judge-picking Committee on the Judiciary, the respected and circumspect Carter explained, “I’m not going to say that a state prosecutor can’t be brought up to speed. But the absence of federal background is certainly a handicap in resolving these difficult issues.” Pointing out that highly technical legal points decided the Louima appeal, Carter said the “subtlety” of the issues “demands an understanding of federal law,” which he said is “different in many respects from state law.”

The Voice has also learned that State Comptroller Carl McCall, who is running for governor, wrote Schumer a three-page letter, with nearly a hundred pages of attachments, deriding the Mauskopf nomination. Sent shortly before the Louima reversals, McCall’s letter concluded that she “appears woefully inexperienced in the most important duties of her proposed office.” Saying she was “not an appropriate candidate,” McCall charged that “the appearance of political favoritism has imbued her tenure” as IG.

The letter cited Mauskopf’s “unacceptable indolence” in probing allegations by Newsday and his office about state architectural contracts awarded Pataki’s next-door neighbor and in-law. It also accused Mauskopf of failing to recuse herself or address her own conflict of interest in conducting investigations that “raised significant and sensitive questions of integrity within the very office of the governor.” Finally, the comptroller said that while she demands that all state agencies cooperate with her probes, she refused to comply with his auditors, a “double-standard” that is “unthinkable” in the U.S. attorney’s office.

As McCall indicates, the questions about Mauskopf’s appointment go well beyond an experience deficit. While Schumer has named a full, statewide screening panel like many of his Senate predecessors, Pataki relied on a one-man panel, Elmira attorney John O’Mara, who recommended Mauskopf. O’Mara, a partner in former senator Al D’Amato’s lobbying firm, also has only state prosecutorial experience. Mauskopf is closely tied to D’Amato through her friendships with D’Amato ex-girlfriend Barbara Jones and former D’Amato top aide Zenia Mucha.

More importantly, O’Mara spearheaded a defense fund designed to blunt a probe of Pataki’s parole board and campaign committee until recently conducted by the Brooklyn U.S. attorney. If a witness agreed to use an attorney on O’Mara’s list, the lawyer would be paid through O’Mara by Pataki’s committee. O’Mara was in effect helping to pick the successor to a prosecutor he was actively combating on behalf of the governor.

A Voice analysis of the Friends of Pataki committee and the state Republican Party has identified $603,900 in fees paid to eight law firms that represented targets and witnesses in this pay-for-parole probe, which resulted in four convictions, including three state officials and one fundraiser long tied to D’Amato. Mucha was subpoenaed before this grand jury, as was Patrick Donohue, the then and current finance director of the Pataki committee who was named as an unindicted co-conspirator in court papers. Donohue took the Fifth Amendment.

Three lawyers who represented Donohue—Paul Windels, Tom Puccio, and Leo Kayser—ran up combined bills of $256,877. The firm of Robinson, Gill, where both Ed Koch and Battery Park city chairman James Gill practice, collected $70,275, in part for representing Mucha. Rod Lankler was paid $102,634, including $25,000 by the state party, for representing fundraiser Cathy Blaney and other committee-connected individuals. Elkan Abramowitz ($95,856) and Matt Fishbein ($45,639) also were substantial winners in the legal sweepstakes.

A state board of elections spokesman said he “doesn’t think there’s a legal problem” with such expenditures, but no campaign committee in New York has ever spent so lavishly to defend itself from a criminal probe. In addition, though 1998 was the most active year in the investigation, the committee delayed paying most of the legal bills until after the governor’s November re-election, spending $120,537 that December alone. If the committee failed to report expenses it knowingly incurred prior to the election, it may have committed a state misdemeanor violation.

While state parole board chair Brion Travis, community affairs director Jeff Wiesenfeld, and other high-level officials were implicated in wrongdoing but not prosecuted, Mauskopf’s office never made any ethics referrals or issued any report about their apparent misconduct. Instead, Travis, who was also named as an unindicted co-conspirator by federal prosecutors, remains in his key position. It is traditionally an IG’s job to sanction a public official whose improprieties do not rise to the level of a criminal charge. A Mauskopf takeover of the same federal office whose evidence of misconduct she ignored is widely seen by veterans as punishment for its role in the most serious corruption case of the Pataki era.

Instead of viewing the prosecutorial choice in his own home district as a decision he does not have to balance against nominations his subcommittee reviews across the country, Schumer appears to be leaning toward giving Pataki and Bush what they want. He publicly cites the unsurprising support of mentor Morgenthau for Mauskopf as a rationale and even appointed Morgy’s favorite defense counsel, Steve Kaufman, to his panel. (Kaufman also represented a Pataki aide implicated in the parole board probe.) Merit may well take a backseat to a Schumer desire to appear nonpartisan, even when faced with so partisan a nominee.


Research assistance: Martine Guerrier, Jess Wisloski, Lauren Johnston, Peter G.H. Madsen



Related Articles in This Issue:


The Louima Decision: Is Punishment Possible for Police Brutality?” by Jill Nelson


Reversal of Misfortune: The Wrong Charges, the Right Decision” by Alan M. Dershowitz

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Pataki Patronage

George Pataki was one of the few governors invited to spend Sunday night at the White House after fellow Yalie George Bush’s dinner for all 50 governors, the New York Post tells us, adding that he is also a hot prospect for vice president on the 2004 ticket. That would seem to make all the more interesting the solitary patronage appointment Bush has sent to the Senate on Pataki’s recommendation: the largely ignored and pivotal nomination of Roslynn Mauskopf as the next United States attorney for Brooklyn, Queens, and Long Island.

The selection of Mauskopf for one of the top prosecutorial posts in the country is a window into the seedy side of Pataki’s Albany, as well as a consequence of his continuing alliance with ex-senator and current big-time lobbyist Al D’Amato. It is also a measure of the will and judgment of the only man in Washington who can stop it, Senator Chuck Schumer, who defeated D’Amato in 1998 after airing a television commercial called “Decades” that documented D’Amato’s long history of sleaze. If Judiciary Subcommittee chair Schumer rubber-stamps Mauskopf, he will be installing a candidate whose ties to D’Amato are so incestuous that he might well have picked her himself if he were still in the Senate.

Mauskopf, a former assistant in Manhattan District Attorney Robert Morgenthau’s office, has been the state inspector general under Pataki since shortly after he took office in 1995. Her appointment was a product of her friendship with Barbara Jones, a top Morgenthau aide who’d been dating D’Amato for years and has since been named to the federal bench. Over the course of her years in Albany, Mauskopf became extremely close to Jones’s best friend, Zenia Mucha, the legendary political operative who has been both D’Amato and Pataki’s top aide. The Post and New York Law Journal have published stories faulting her social ties to those at the head of a government she is charged with independently investigating.

What’s most disturbing is that if confirmed by the Senate, Mauskopf will be taking over an office that just launched an investigation involving D’Amato. Newsday and the Times revealed last week that the office is probing Computer Associates International (CA), the giant Long Island software company whose financial and accounting practices have been likened to Enron and Global Crossing. CA chair Charles Wang has long been so tied to D’Amato that he broke records orchestrating $128,000 in hard and soft money contributions to aid D’Amato’s 1998 re-election, encouraging 14 CA employees or spouses, including a Wang secretary, to give the federal maximum. He and another CA executive have given Pataki $60,000 since March 1999. Six months after D’Amato left the Senate in 1999, Wang helped name him to CA’s 10-member board of directors.

Last August D’Amato was one of four directors unsuccessfully targeted for dumping by disgruntled CA shareholders led by the California Public Employees’ Retirement System and two nationally known proxy fight advisers. Institutional Shareholder Services, the influential Maryland-based adviser, slammed CA for “deplorable” corporate governance, citing in particular the “overcompensation” of executives. Wang and others were once given a $1.1 billion package, later reduced in the courts, though shareholders have experienced a negative 11 percent stock return over the last five years. Shareholders attributed their opposition to D’Amato—without citing specifics—to his role on the board’s compensation committee.

Newsday reported last week that the preliminary inquiry, jointly run by the U.S. attorney, the FBI, and the Securities and Exchange Commission, “seeks to determine whether top CA officials profited from share sales in advance of disclosing to the public negative news about the company’s financial results.” Prosecutors are also examining allegations that CA fraudulently overstated financial results to inflate its share price.

While Mauskopf could recuse herself on the CA probe—turning over its supervision to assistants—this would hardly cure the problem. The Brooklyn office has spearheaded so many investigations connected to D’Amato and Pataki over the years that it should be run by a prosecutor with no significant ties to them. The office nailed D’Amato’s political mentor, Nassau GOP boss Joe Margiotta, as well as his brother Armand (a conviction overturned on appeal), his securities broker Stratton Oakmont, and his mob-tied contractor Phil Basile. Brooklyn prosecutors also recently convicted Suffolk GOP boss John Powell, one of Pataki’s top party backers, and four Pataki aides or backers in a probe of the state parole board.

The parole board probe—which focused on allegations that Pataki’s campaign traded paroles for contributions—offers another reason why Schumer should nix the Mauskopf choice. Mauskopf was the pick of a federal judicial screening panel set up early last year by Pataki and chaired by upstate attorney John O’Mara, a D’Amato partner in a lobbying firm called D&O Consultants. O’Mara, who was the only member of the panel at the time of Mauskopf’s recommendation, was running a secret defense operation on Pataki’s behalf to blunt the parole board and other federal investigations.

Four attorneys who represented subjects or witnesses in the inquiry have confirmed that O’Mara approved and paid the legal fees for state or campaign employees caught up in the probe. Filings for Friends of Pataki list $354,198 in fees paid since January 1999 to eight law firms identified by the Voice as having represented individuals involved in the investigation (the filings for 1998, when the probe was most active, are in state archives). Paul Windels, who represented Pataki campaign manager Patrick Donohue and was paid $45,818 by Friends of Pataki, says, “I was retained by O’Mara. He had the say on the payment of fees on behalf of the committee.”

Among the other lawyers who were paid by the Pataki committee were Rod Lankler ($77,634), Elkan Abramowitz ($95,856), Austin Campriello ($46,716), Tom Puccio ($53,900), and Leo Kayser ($27,691), all of whom were involved in the parole probe. O’Mara, who ran D’Amato’s Senate campaign upstate as far back as 1980 and was Pataki’s Public Service Commission chair until recently, was simultaneously picking the U.S. attorney and orchestrating a legal campaign against the same office. Prior federal appointments have always been reviewed by a real panel of prestigious attorneys named by the state’s two senators, but Pataki has allowed O’Mara alone, who used to be a member of D’Amato’s panel, to make the recommendations.

In a Voice interview, Senator Schumer said he “was not choosing” the Brooklyn prosecutor, merely “setting a bar or standard” that nominees must meet. When he recently declared that he was “troubled” that Pataki’s candidate for U.S. attorney in Manhattan—the governor’s own counsel, Jim McGuire—had no federal prosecutorial experience, the White House declined to send the name to the Senate. “I’m also troubled by this one,” he told the Voice, referring to Mauskopf’s lack of federal credentials. But Schumer said he has not made up his mind on confirming or opposing her. She is scheduled to meet with him in the next two weeks.

There is little about her background to engender confidence. Over her 13 years in Morgenthau’s office, she tried two major cases, convicting a lawyer (who represented himself) of stealing millions from his clients. In the other case, heavyweight boxer Ray Mercer was acquitted on all counts after she charged him with trying to fix a fight. The jury, who fell asleep during her summation, reached a unanimous verdict in less than five hours. She credits herself with playing a major role in the prosecution of a mob trucking cartel in the garment district, but it was State Attorney General Eliot Spitzer who led that probe when he was a young assistant in Morgenthau’s office.

Similarly, Carl McCall, the state comptroller, has slammed the management of Mauskopf’s inspector general’s office in an audit, calling her “unqualified” to be U.S. attorney. Schumer will decide if she’s good enough for him.


Research assistance: Jesse Goldstein, Martine Guerrier, Lauren Johnston, Peter G.H. Madsen, Jess Wisloski

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Drinks Parties

DIONYSUS PATRICK

Age 24

Resides Brooklyn

Occupation Gym attendant

What do you think about the proposed alcohol ban? It’s stupid. You can’t honestly say that alcohol leads to crime. Nobody commits crimes drunk. Nobody robs a bank drunk.

Do you ever drink in public? Yes, but I usually only drink at the Caribbean Festival and then only out of plastic cups, not cans. You can drink it and dump it pretty quickly.

What have you done publicly that you could be arrested for? In Trinidad, I take my clothes off in public to swim. Here, we’re very confused about sexuality and the human body. One minute we say we want freedom, the next we’re preaching morality. For most of the world it’s not a big deal.


CHAD SMITH

Age 31

Resides Manhattan

Occupation Theater technician

What do you think about the proposed alcohol ban? It’s ridiculous. It’s not going to stop anyone from drinking on the street. I heard Al D’Amato debating Ed Koch on this issue. Koch said it’s always going to be one of the pleasures of living in New York to have a beer or a glass of wine at a festival and then walk around and do some shopping.

Do you ever drink in public? Yes.

What have you done publicly that you could be arrested for? Whatever I do, I am extremely discreet. I have smoked a joint and had a beer in public. I’ve peed in an extreme emergency.


MARTY HAMILTON

Age 33

Resides Manhattan

Occupation Designer

What do you think about the proposed alcohol ban? It’s a horrible idea. These festivals depend on money they get from selling alcohol. The Oyster Festival is sponsored by Guinness. How will the San Gennaro Festival survive?

Do you ever drink in public? Before I knew it was illegal, I bought a beer and drank it on the street.

What have you done publicly that you could be arrested for? Not much. I did lie naked in Times Square for the artist Spencer Tunick. I got up at five in the morning and, along with 200 other people, took off my clothes. Nobody got arrested except for Spencer. I did lose my pants, however.


TAYLOR

Age 23

Resides Manhattan

Occupation Messenger

What do you think about the proposed alcohol ban? I think the mayor’s pushing it.

Do you ever drink in public?

Yes, at exactly the kinds of festivals we’re talking about. I’ve also chosen to buy wine coolers just because the bottles don’t look like they contain alcohol. The dead giveaway is the brown paper bag.

What have you done publicly that you could be arrested for? When the West Village piers were still standing, I once ended up there, but whatever happened, happened in the dark. I’d rather smoke pot outside because the smell doesn’t stick to your clothes.


LOLET GUILDFORD

Age 25

Resides Brooklyn

Occupation Computer engineer

What do you think about the proposed alcohol ban? It’s not going to work. In the summertime, it’s hot and people are going to want to drink and relax. The Puerto Rican Day fiasco in Central Park had nothing to do with alcohol. As usual, it was a matter of men disrespecting women.

Do you ever drink in public? Yes.

What have you done publicly that you could be arrested for? I’ve been drunk in public. I’ve never peed in public because as a woman it’s just too hard.


KAREN TEJERA

Age 25

Resides Yonkers

Occupation Administrative assistant

What do you think about the proposed alcohol ban? I think it’s a good idea. If you can’t drink on the street, why should you be able to buy alcohol at street fairs?

Do you ever drink in public? No.

What have you done publicly that you could be arrested for? I’m drug-free, so anything like that is out. However, I do pee in public all the time. I’m like a guy that way.


HIDEYUKI MORIBAYASHI

Age 23

Resides Manhattan

Occupation Tech support

What do you think about the proposed alcohol ban? It depends on the festival, but since it’s already illegal to drink on the street, I don’t think it’s such a contradiction to ban alcohol at street fairs. If this proposal is being made in reaction to the Puerto Rican Day riot, I would say that it’s hard to pin mass hysteria on alcohol.

Do you ever drink in public? No, though I have been drunk in public.

What have you done publicly that you could be arrested for? I’ve smoked a joint. I’ve gone to the bathroom outside. Women would do it too if they could.