October 21, 2010
Report Criticizes Senators on Casino in Queens
By CHARLES V. BAGLI, NY TIMES
LINK

State Senate leaders manipulated the choice of who would build New York City’s first casino, leaking information and showing favoritism to a troubled bidder that was donating to Democratic candidates and had ties to key political figures, the state inspector general said Thursday.

In a scathing 308-page report on the competition to install video slot machines at the Aqueduct racetrack in Queens, the inspector general described a chaotic and ultimately doomed process that was without formal rules or objective criteria, and was awash in “unrestrained political considerations,” lobbyists and targeted campaign contributions.

The report says that the bidder, a consortium called the Aqueduct Entertainment Group, marshaled funds at the behest of the state’s Democratic Senate Campaign Committee, casting “a taint on the motives behind the Senate leadership’s support of” Aqueduct Entertainment. The investigation included interviews with senators and other state officials, as well as internal e-mail among Aqueduct Entertainment members and lobbyists.

Citing possible violations of laws governing public officials by John L. Sampson, the Senate Democratic leader from Brooklyn; Malcolm A. Smith, the Senate president from Queens; and Angelo Aponte, the appointed Senate secretary, the inspector general’s office said it was referring its findings to federal and state prosecutors and the Legislative Ethics Committee.

“At each turn, our state leaders abdicated their public duty, failed to impose ethical restraints and focused on political gain at a cost of millions to New Yorkers,” Inspector General Joseph Fisch said in a statement. “Shamefully, the public’s best interest was a matter of militant indifference to them.”

The report — following a classic outline of state business distorted by lobbyists, politics and money — emerges in the final weeks of an election season in which candidates across New York State have vowed to clean up Albany.

Besides the Senate leaders, the report faults close aides to Gov. David A. Paterson for not keeping him apprised of concerns about Aqueduct Entertainment, blames the governor himself for relinquishing control of the process and criticizes the Assembly speaker, Sheldon Silver, for Sphinx-like silence despite his own knowledge of Aqueduct Entertainment’s problems.

Mr. Paterson, along with leaders of the Senate and the Assembly, selected Aqueduct Entertainment in January to operate 4,500 electronic slot machines at Aqueduct, a franchise worth tens of millions of dollars a year to the operator and an estimated $1.5 million a day in tax revenue for the state’s depleted coffers.

After complaints of favoritism surfaced, Mr. Paterson reversed the selection in March. The casino is now being built by a subsidiary of an international entertainment company, Genting New York, which won a follow-up competition. Among other pledges, Genting offered an upfront payment to the state of $380 million, which it has already paid.

Before the reversal, however, Senators Sampson, Smith and Eric Adams of Brooklyn, the chairman of the Senate racing and gaming committee, mingled with an Aqueduct Entertainment partner, Jeffrey Levine, and Aqueduct Entertainment’s lobbyists at what one participant called a “victory celebration” held at the Albany home of one of those lobbyists, Carl Andrews, a former state senator.

“This report reveals Albany at its most sordid,” said Blair Horner, legislative director of the New York Public Interest Research Group. “Every New Yorker should be outraged. We urge the district attorney and U.S. attorney to move quickly on the I.G.’s finding of possible violations of the public officers law.”

In a statement on Thursday, the governor’s communications director, Morgan Hook, said, “While we are still reviewing the I.G.’s findings, one thing is indisputable: Earlier this year, Governor Paterson refashioned the selection process for a gaming operator at Aqueduct and further convinced the legislative leaders to adhere to this new process.”

Mr. Sampson, in a statement, did not specifically address the accusations. “The inspector general’s report highlights the well-known flaws in the selection of a bidder to operate a video lottery terminal facility at Aqueduct racetrack,” he wrote. “The process lacked structure, and the rules changed repeatedly.”

Several other officials named in the report, including Mr. Smith, Mr. Adams and Mr. Aponte, did not respond to requests for comment Thursday. A spokesman for Aqueduct Entertainment declined to comment. In a statement, Mr. Silver called the report “the comprehensive, thorough investigation I asked for in February” about the selection process.

The report concludes that Aqueduct Entertainment should have been disqualified from the start because of concerns about its financial stability and legal problems of some of its members. Instead, the governor’s office and Senate leaders ignored advice from the State Budget Office and the Division of the Lottery to disregard the company’s bid.

Aqueduct Entertainment was founded by Karl O’Farrell, an Australian investor with a number of legal problems that regulators viewed as troublesome, and included Larry J. Woolf of the Navegante Group, a Las Vegas casino company; Levine Builders, a developer based in Queens; and the Rev. Floyd H. Flake, a former congressman who remains influential in Queens politics.

The inspector general found that an assistant to Mr. Aponte, the Senate secretary, leaked a Senate memorandum detailing the six competing bids to Hank Sheinkopf, an Aqueduct Entertainment lobbyist and a longtime political consultant, in May 2009. On May 12, 2009, Mr. O’Farrell wrote an e-mail to other members of his consortium that said: “On the information leaked so far, we are looking good. Hopefully more today.”

In November, Mr. Sampson disclosed more information about the bidders and their comparative rankings to Mr. Andrews, the report said. The bids were being judged on how much money the bidders would guarantee for the state, how quickly they could open, their financial health and their ability to meet State Lottery licensing requirements.

Bidders were permitted to alter their proposals, and at one point the state even requested that they do so to guarantee more money for the public. The report did not tie either leak to a specific change in Aqueduct Entertainment’s bid, but it did say that on Sept. 23, the group modified its financial projections in such a way that it vaulted from last to first on that criterion (one bidder had dropped out).

The report also said Aqueduct Entertainment had been urged to bring aboard a particular developer, Donald Cogsville. An internal e-mail said this request was “at the insistence of a certain senator,” and one of the group’s members told the inspector general’s office that he believed the senator to be Mr. Sampson.

The report did not say why Mr. Sampson might push Mr. Cogsville’s interests, and the Senate leader told investigators that he could not recall doing so.

At a news conference on Thursday, Mr. Fisch said Mr. Sampson’s testimony lacked credibility. “I stopped counting the number of ‘I don’t recalls’ when I reached 100,” he said.

Mr. Smith, who had publicly recused himself because his mentor, Mr. Flake, was a minor partner in Aqueduct Entertainment, demanded briefings from Senate staff on the bidding and advocated on behalf of Aqueduct Entertainment, the report added. Mr. Smith also had once been a business partner of Darryl Greene, an early member of Aqueduct Entertainment who later dropped out.

The report describes the selection process as a “political free-for-all,” with nearly every Albany lobbyist employed by one of the six companies vying for the franchise; Aqueduct Entertainment hired seven. The rival bidders showered important legislators and the governor with more than $100,000 in contributions, the report said, with Aqueduct Entertainment coordinating $40,000 of its own donations with the Democratic Senate Campaign Committee and instructing a “subcontractor to make a contribution in order for the monies to be pooled with contributions from other A.E.G. members.”

A public relations consultant for Aqueduct Entertainment told the inspector general that someone in the campaign committee’s office “contacted me and said we would be appreciative if you could help raise money for Aqueduct Entertainment Group, your partners, for these five individuals.” The five were Democratic senators, including Mr. Adams.

While the inspector general is forwarding the report to prosecutors, the report appears to acknowledge that proving a criminal case might be hard because the selection process had almost no rules. The leaked information, for example, would have been considered confidential “in any legitimate pending procurement process,” the report said. Likewise, the standard prohibition on legislators accepting donations from companies with business before them did not apply in the casino selection process, the inspector general wrote.

Nevertheless, at least two people involved in the process invoked the Fifth Amendment and would not speak with the inspector general’s office: Mr. Sheinkopf and David W. Johnson, a close aide to Mr. Paterson. The report said that although Aqueduct Entertainment did not lobby the governor, it did reach out to Mr. Johnson, who subsequently pushed for the company within the executive office.

Earlier this year, Mr. Paterson dropped out of the governor’s race days after a report in The New York Times raised questions about whether he and his administration had improperly tried to pressure a woman who had accused Mr. Johnson of domestic violence. In July, a state investigation found that the governor and his advisers made errors of judgment but that their actions were not criminal. Mr. Johnson has been charged with assault.

A lawyer for Mr. Sheinkopf, Henry Mazurek, did not deny that Mr. Sheinkopf received the bidding information. He did dispute any notion that any bidding material was “confidential.”

“There were no restrictions on the Senate or the Assembly as to what they could do with any information they received with respect to the bidding process,” he said. “There were no controls.”

Mr. Mazurek said he did not know whether any other bidder also received inside information.

The inspector general’s report said Mr. Paterson’s counsel, Peter J. Kiernan, never disclosed to the governor that the State Lottery office, which was responsible for evaluating the bids, had considered Aqueduct Entertainment’s unacceptable, although Mr. Kiernan himself was often critical of the consortium’s bid.

Danny Hakim contributed reporting.

October 21, 2010
For Democrats, Aqueduct Report Complicates a Difficult Election Season
By DANNY HAKIM, NY TIMES
LINK

ALBANY — For many prominent Democratic campaigns across New York State, the release of the state inspector general’s searing Aqueduct Racetrack report on Thursday raised a dilemma.

The report painted a picture of a state led by Senate Democrats with little apparent interest in serving the public honestly and forthrightly, a Democratic Assembly speaker engaging in political gamesmanship and a Democratic governor disengaged to the point that his own staff withheld crucial information from him and called him a liar in internal e-mails.

Not surprisingly, the findings left a number of Democratic candidates pondering how to handle such a toxic excoriation of their own party’s competency — from the office of a Democratic appointee, Inspector General Joseph Fisch, no less. His report accused state leaders of badly mishandling the selection of an operator for a casino at the Aqueduct racetrack in Queens.

Senator Eric T. Schneiderman, the Democratic candidate for attorney general, who is running in perhaps the closest statewide race, has been an ally of the Senate leader, John L. Sampson, who was savaged in the report for a lack of candor and an abundance of self-interest. Mr. Schneiderman, who has portrayed himself as a legislator unafraid to take on corruption by his colleagues, faced the question of whether to turn on him.

Mr. Schneiderman said Thursday that he would return $76,000 in contributions made to his campaign this year by the campaigns of Mr. Sampson; the Senate president, Malcolm A. Smith; and Senator Eric Adams, all of whom were criticized in the report.

“The allegations reported today are beyond disturbing — they are horrendous,” Mr. Schneiderman said in a statement, adding that “out of an abundance of caution and to avoid even an appearance of conflict, I have directed my campaign to return any and all contributions from those cited in this report.”

His opponent, Daniel M. Donovan Jr., the Republican district attorney from Staten Island, said the report was another example of the conflicts Mr. Schneiderman would face if he tried to pursue corruption.

“The public needs to be assured that someone is in the attorney general’s office who is independent of all these interests, whether it’s these other elected officials who are under investigation or the unions that put a chokehold on our state budget for the last decade,” he said in an interview.

Attorney General Andrew M. Cuomo, the Democratic nominee for governor, has also campaigned on cleaning up Albany, but he has only glancingly criticized his party’s leadership. Mr. Cuomo is far ahead in the polls; one of his few areas of vulnerability is his relations with black political leaders, and openly criticizing Mr. Sampson and Gov. David A. Paterson would be a delicate matter.

At an appearance on Thursday, Mr. Cuomo played it safe.

“I haven’t had a chance to go through it, obviously it’s a 300-page report, and there is an ongoing investigation on the matter, so it would be inappropriate to comment,” he said. “But suffice it to say there have been a number of these types of situations over the past few years that I’ve been attorney general, and my approach has always been the same: you need to have zero tolerance for waste, fraud and abuse.”

The report gave Republicans ammunition against a State Senate leadership already in peril of losing its narrow majority.

“The disgraceful, criminal conduct of Senate Democrats exposed by the inspector general makes it clear they were only looking after their own political best interests,” said Senator Dean G. Skelos, the leader of the Republican minority.

Mr. Sampson said that the Senate would conduct an internal review and that he was confident it would “prove I did nothing improper.”

The report appeared to hold the most promise for Senate Republicans, who hold 30 of the 62 seats in the Senate. If polls are to be believed, Republicans in New York do not appear to be poised for the gains that Republicans nationwide are expecting in the elections next month. But one area of hope for the party is the Senate, and this scandal falls squarely on the Democrats.

“I would be shocked if over the course of the last 10 days Republican challengers don’t try to make a major issue of this,” said Steve Greenberg, a spokesman for the Siena Research Institute, whose recent polls have shown gains by Republican challengers for Senate seats.

Within hours of the report’s release, Republicans were indeed discussing how they could capitalize on the news; to this point, the economy and taxes have been the primary focal point in the messages of Senate candidates.

Republicans, however, were not entirely exempt from the report. One Assembly candidate from the southwestern tip of the state, Andrew Goodell, was mentioned at length. Mr. Goodell did legal work for Aqueduct Entertainment Group, the consortium that won the bid but was later disqualified, and represented its most controversial partner, Karl O’Farrell, even creating a shell corporation in which he would hold shares in A.E.G. on Mr. O’Farrell’s behalf. That arrangement enraged even one of A.E.G.’s prominent lobbyists.

Mr. Goodell, who said in an interview that he had done nothing improper and had even made state officials aware of Mr. O’Farrell’s role, has promised to bring the “highest ethical standards” to Albany.

Kangaroo Casino
By Eliot Brown
February 23, 2010 | 6:26 p.m
LINK

In mid-2006, Karl O'Farrell, an Irish-born entrepreneur from Australia with a penchant for gambling, hatched a quixotic plan to take over and develop New York's biggest horse-racing tracks. That plan was the root of the political maelstrom that now engulfs Governor Paterson's selection of a team to build a casino at the Aqueduct Racetrack in Queens, a selection now under investigation by the state's inspector general and involving one of the largest real estate procurements in New York history.

The team is an expansive one of eclectic characters, politically known names and financiers—hip-hop mogul Jay-Z, former congressman the Rev. Floyd Flake and onetime MGM Grand Hotel CEO Larry Woolf, to name a few—all operating under the umbrella of "Aqueduct Entertainment Group." Mr. O'Farrell helped hatch the team and, ultimately, was forced to relinquish any potential stake amid financial troubles and concerns raised by regulators.

An owner of the Capital Play racing bookmaker in Australia, Mr. O'Farrell submitted a 2006 bid to take over racing and gaming at the three main New York State horse-racing tracks—Saratoga, Belmont and the Aqueduct—with the potential to install slot machines at least at the Aqueduct.

His bid was an unlikely one. He was an outsider in what was sure to be a political process; he didn't have U.S. experience; and he was not politically well connected in Albany. He also had a small New York operation. His co-op apartment at 23 East 10th Street was listed as Capital Play's place of business ("Suite 808"); he met colleagues in restaurants or at their offices; he sifted through various consultants at first; and consultants complained multiple times of slow or nonpayment.

The arriviste ultimately built a team of investors, along with an expansive public-affairs operation that enlisted an array of lobbyists and other firms. One public-relations executive in particular, Andrew Frank of the firm Kreab Gavin Anderson, quickly became a top aide to Mr. O'Farrell, according to other former team members, serving a key role throughout the bids. A 44-year-old onetime spokesman within the Clinton administration who has long, dark hair, Mr. Frank brought in a new set of lobbyists—Bolton St. John's and Cordo and Company—assuming the job of corralling all the various lobbyists and consultants, coordinating and orchestrating the push on public officials.

In terms of racing and gaming, Mr. O'Farrell, who did not respond to interview requests, was described by those who worked with him as a visionary, seeing the potential for racetracks to become a social destination, an upgrade from their traditional role as a magnet for sad-sack middle-aged men to bet away money. He was well read, they said, and talked a big game.

"The way to get young people to the track is by getting women there," he told Thoroughbred Daily News in 2007. "You need good restaurants with quality food, good wines. People want good-quality wines at a reasonable price. And you've got to have the glamour."

He was "a very, very smart guy who actually had some ideas that may have worked," said Hank Sheinkopf, a public-relations and political consultant who worked on the Capital Play team. "He was amazed by the inability of New York to move forward and protect racing."

But midway through the second bid, Mr. O'Farrell's history and finances drew red flags with New York State vetters, forcing him to step down as Capital Play's president in order for the bidders to be eligible to receive the necessary license. A New York inspector general report found that his Capital Play company in Australia lost money in five of the previous six years. He was involved in disputes over about $10 million in loans back home, too. He had run into franchising disputes with the New York Racing Association, leading to termination of his simulcast contract. Finally, he was in bankruptcy in Australia, according to court records, with creditors looking to seize some of his assets in the U.S., listed by Mr. O'Farrell as including two apartments in Chicago and horses worth more than $300,000.


Ultimately, Capital Play did not win. First, the team lost the racing franchise agreement to the existing, cash-strapped operator, New York Racing Association, a move that stunned the competitors involved. Then he lost in a second bid, with a different team, to develop slot machines, or Video Lottery Terminals, at the Aqueduct.



THAT SLOT-MACHINE DEAL, though, fell apart in March 2009. And Mr. O'Farrell had not given up his gamble.

In April 2009, the state once again opened bidding. From the ashes of Mr. O'Farrell's Capital Play bid arose the Aqueduct Entertainment Group. Precluded from taking a leading role given concerns of regulators, he worked behind the scenes to help form AEG, according to people who worked with Capital Play, and did not take an equity stake, according to AEG.

But the state continued to raise concerns over Mr. O'Farrell's involvement. In September, to clear vetting, AEG wrote to the state that it terminated an agreement that would have entitled a company controlled by Mr. O'Farrell a $15 million bonus if AEG won the bid.

In terms of image, the new AEG bid went local. It emphasized the community; it trumpeted a commitment to minority participation; and its public image seemed to be dominated by Mr. Flake, a reverend with strong connections to Queens politicians, including the Senate's president, Malcolm Smith, and who had a tiny 0.6 percent equity stake. It also signed on fame: Jay-Z had a 1.25 percent stake, according to a shareholder roster from the fall.

But if it was this sprawling team approach that helped propel AEG to victory, it may also be what precipitates its downfall.

Three days after Governor Paterson announced his choice of AEG, he met with Mr. Flake, tinging the entire deal with the appearance of malfeasance. Mr. Flake had just days before told The New York Times he might endorse Mr. Paterson's likely 2010 rival, Andrew Cuomo, which made the bid-granting process look like a possible quid pro quo: that Mr. Paterson's choice of AEG, the low bidder in an early set of numbers analyzed by the state, was connected to the governor's race. (Mr. Paterson, who agreed to select AEG with Assembly Speaker Sheldon Silver and the State Senate Democratic leader, John Sampson, has denied wrongdoing.)

Now AEG is in the tabloids on a daily basis, unable to shake the qualifier "politically connected" from most stories on the topic. In truth, each of the bidders played politics with the process, employing armies of lobbyists, fund-raisers and other consultants with links to the Paterson administration and key members of the Legislature for what was sure to be a less-than-solidly-rational selection process.

AEG is racing to complete a memorandum of understanding with the state, even as an inspector general investigation pushed by Assembly Speaker Silver moves forward. A spokesman for the firm said AEG is working with New York to finalize the agreement, "so that we can provide New York with $300 million in sorely needed revenue."

But the investigation may delay any imminent action. Other bidders are circling, and the public perception of the deal has been severely tainted.

Mr. O'Farrell, meanwhile, has disappeared from the public scene. AEG insists he has no involvement at all anymore and no ability to take money out of the deal (though the state declined to provide additional correspondence documents to back up this claim, citing an investigation). And Mr. O'Farrell, once the out-front man happy to hop on the phone with elected officials and reporters, did not respond to emails or calls to multiple phone numbers.

ebrown@observer.com

From Carl Paladino:

THE AQUEDUCT SCANDAL AGAIN SHOWS ANDREW CUOMO'S SILENCE ON ALBANY DEMOCRATS' WIDESPREAD CORRUPTION

In Monday's New York Gubernatorial debate at Hofstra University, Andrew Cuomo depicted himself as an Albany outsider intent on prosecuting governmental wrongdoings. The reality, of course, is the exact opposite: Cuomo has spent his entire adult life in government and politics as an Albany insider. For three years of that lifetime in politics he has been the chief prosecutor of the most corrupt state in America and a member of Governor David Paterson's cabinet.

Reality: Cuomo represents the very system he insincerely claims to want to reform. As New York Attorney General, Cuomo has routinely and severely politicized the office of the Attorney General, refusing to investigate or prosecute crimes from his fellow Democrat insiders and political friends.

Yesterday's release of a damning New York State Inspector General report on the Queens-based Aqueduct Racetrack further underscores this reality. The report, which detailed widespread corruption and probable crimes by prominent New York Democrats, again demonstrates Cuomo's ongoing practice of failing to criticize, investigate, or prosecute his Democratic friends.

Faced with a report containing hugely serious allegations, including perjury, bid rigging, illegal leaks of confidential information, and cover ups by New York's Democrat officials, Cuomo's silence on the corruption of his Democrat friends continued. Cuomo's response to the allegations: "It wouldn't be appropriate to comment."

Cuomo's silence does not alter the fact that the Aqueduct scandal is the latest example of an Albany political machine that routinely discards public trust in favor of political self-interest. Nor does it change the fact that Cuomo has received campaign contributions from individuals and companies aligned with the scandal, including Levine Builders, Turner Construction, Greenstar Services, and Floyd Flake.

According to the IG report, New York Democrats helped rig "a bidding process rife with inside dealing, secret lobbying and more than $100,000 in campaign donations from the bidders." The alleged wrongdoing goes to the highest levels of New York's Democrat Party, including John Sampson, the current Democrat Conference leader in the New York State Senate, and Malcolm Smith, the Democratic Senate President. The report also details a Paterson administration that utterly failed in its oversight responsibilities, while New York Democrats worked clandestinely behind the scenes with lobbyists to secure contracting rights for its preferred slot-machine vendor, Aqueduct Entertainment Group.

And, of course, then there's Assembly Leader Democrat Sheldon Silver.

Andrew Cuomo is prepared to condemn Albany corruption in abstract, cliche-ridden ways before political audiences. But when the rubber hits the road and that corruption is intertwined with his Democrat political friends - Andrew Cuomo is silent

Andrew Cuomo serves no higher cause than his own political self interest and he is not fit to serve as Governor of New York.