A Veritable Case Study in Corruption

- Don't really know where to start in discussing Inspector General Joseph Fisch's report on the investigation into the shenanigans that resulted in the selection of Aqueduct Entertainment Group to operate the Big A racino. The report (pdf file) runs 308 pages; about 90 of those deal with background. The rest are devoted to what was described as an unabashed favoritism towards AEG "nearly from the outset of the process" by the Senate Democratic leaders; leaked information on competitors' bids, a coordinated effort to target campaign donations from AEG to selected senators, a passive governor left in the dark (figuratively and literally, in his case) on the merits of the bidders by some of his closest advisors, agencies which did their jobs admirably seeing their conclusions ignored, conflicting accounts and incredibly (and convenient) lapses in memory, and a Speaker whose passive-aggressive approach to an outcome he knew very well was untenable cost the state additional time and money.

The short line in the long report which might best sum up what transpired is the one that called it "a veritable case study in dysfunctional and politically driven government." But that only scrapes the surface.

The report has become a contentious issue in at least one campaign in New York. And though the Republicans, a desperate breed in this state at least, are going overboard in some cases, as usual, I think it's a totally legitimate issue and one they'd be fools to not try to exploit to full advantage. I mean, I think the GOP is full of it in most respects; they've spent the last two years opposing the president at every turn, demonizing him merely for fulfilling his campaign pledges as if he's steered the country in some unexpectedly radical turn, and purposefully not condemned nor disassociated itself from the basest incitements of hatred and racism emanating from its fringe elements. (Not that it hasn't been brilliant politics of course, supplemented by the massive influx of money from anonymous conservative outside groups protecting their own self-interests.) But in this case, the conduct of the Democrats in question was so egregious, that it's all fair play as far as I'm concerned.

And, as I've written repeatedly here, what makes it all even more outlandish is that the connections between AEG and Senator Malcolm Smith were broadly reported from the very first day. Still, Smith, Sampson, and their cronies carried on the corrupt process in a display of brazen and shameless disregard for appearance and consequences that is shocking to me even in the context of Albany. Not to mention that this went on with the Bruno trial in the background.

If, like me, you haven't yet found the time to digest the report in its entirety, you can get a comprehensive overview by investing around 20 minutes to read the final section - 15 concise pages - FINDINGS AND RECOMMENDATIONS. Or, you can just scan through the Table of Contents. Here's some highlights:

B. EFFECT OF EXTENSIVE, UNDOCUMENTED, UNHINDERED LOBBYING......................100

A. O’FARRELL OBTAINS BID INFORMATION DAYS AFTER SUBMISSIONS....................109

C. AEG ATTEMPTS TO CONCEAL THE SOURCE OF THE INFORMATION OBTAINED FROM ANGELO APONTE’S OFFICE...............................................112

D. APONTE DENIES KNOWLEDGE OF THE LEAK OF INTERNAL SENATE INFORMATION TO HANK SHEINKOPF AND AEG...................................114

E. SENATE MAJORITY COUNSEL’S OFFICE DISCLOSES INFORMATION TO AEG..........117

1. Senator Malcolm Smith’s Illusory Recusal Due To Relationship With AEG....152

A. AEG INFLATES IT’S WIN-PER-DAY PROJECTIONS....................................183

C. AEG’S CONTINUED LICENSING PROBLEMS AND LOTTERY’S E-MAIL REGARDING AEG’S LICENSABILITY.......................................................194

X. SENATOR SAMPSON DISCLOSES INTERNAL SENATE MATERIALS TO AEG LOBBYIST CARL ANDREWS.........................................................................211

B. SENATOR SAMPSON “INSISTS” AEG INCLUDE DEVELOPER DONALD COGSVILLE..228

C. CARL ANDREWS IS FINANCIALLY REWARDED FOR HIS “DIRECT LINE TO SAMPSON”.............................................................232

B. AEG TARGETS CONTRIBUTIONS AT DIRECTION OF SENATE DEMOCRATIC CAMPAIGN COMMITTEE....................................................................237

A. GOVERNOR PATERSON: SENATORS SAMPSON AND ADAMS DEMANDED SELECTION OF AEG..............................................................246

B. SENATOR SAMPSON: AEG CHOSEN AS THE “CONSOLATION PRIZE” JOINTLY BY HIMSELF AND SPEAKER SILVER.......................................251

D. SENATORS SAMPSON, SMITH AND ADAMS AND SEVERAL ASSEMBLY MEMBERS ATTEND VICTORY CELEBRATION AT CARL ANDREWS’S HOUSE..................................266

There you have it, basically. But let's take a closer look at some aspects which I found to be surprising or particularly noteworthy:

- As the process wore on, we started to read reports that Karl O'Farrell, the irrepressible leader of Capital Play, the Australian franchise contender who wanted to turn Aqueduct into a singles bar and build a "beautiful fence" around Saratoga, was involved with AEG (and, following the selection, that his involvement was one of the issues regarding their licensability). Turns out that he was more than just involved. At various points in the report, he is referred to as the "AEG founder!"

AEG was formed by two principal partners of the 2008 bidder Capital Play: Mohegan Sun, the well-established gaming operator, and Karl O’Farrell, the individual jettisoned by Capital Play due to his inability to obtain a New York State Lottery license. However, a few days prior to the May 8, 2009 submission deadline, Mohegan Sun announced it would not participate in the bid and AEG was required to find another gaming partner. Although O’Farrell was described by AEG to the executive agencies as an “independent consultant,” O’Farrell’s testimony, other AEG members’ testimonies, and documentary evidence demonstrate that he was an organizer and founder of AEG and clearly was a moving force behind AEG and its bid submissions.

As you may recall, AEG announced itself as a partnership of various entities along with the gaming company Navegante Group; O'Farrell was never mentioned, and AEG maintained a consistent effort to hide his involvement throughout.

The report also describes a relationship between O'Farrell and Racing and Wagering Board Chairman John Sabini, with whom O'Farrell testified that they "actually would catch up for a beer now and again.” Sabini lobbied for, and was granted a role in the selection process, and in an email to an AEG colleague, O'Farrell wrote “our friend has just been appointed by the governor to be a part of the aqueduct decision making process," which drew the response, "that is very good."

O’Farrell confirmed for the Inspector General that his “friend” referenced in these e-mails was Sabini.

While the report concludes that Sabini ultimately had no role in the actual selection, it calls his involvement "unwise in light of his contacts with O’Farrell."

- This was the first I knew of the involvement of Hank Sheinkopf with AEG. He's a prominent and well-respected Democratic consultant who has worked with the likes of Eliot Spitzer, Bill Clinton, and Mike Bloomberg (well, mostly Democratic....though he's not the only one to have sold out to the Mayor).

Sheinkopf was able to obtain, from the office of Angelo Aponte, the Senate Secretary, "the actual Senate review documents which provided the exact components of each of its competitors’ submissions." The documents were emailed to Sheinkopf from Matthew Rey, the Special Assistant to the Secretary, with the note "Here is what I have as per Angelo." O'Farrell subsequently forwarded the memo to the AEG team "(subject: “Comparative bids”)," though not before having them electronically scrubbed to hide its source.

Aponte denied authorizing his assistant to send the materials, a claim that the IG called "implausible" and "simply not credible."

"Incredibly, Aponte went so far as to claim that Rey, a recent college graduate, had the authority to retrieve Aponte’s e-mails in order to obtain the materials and “probably” had the authority to unilaterally disseminate the memorandum and that this action would not be “inappropriate.”"

As for Sheinkopf's testimony, there was none. He invoked his Fifth Amendment rights, "as his answers could incriminate him in a criminal proceeding, and noted his intention to do so with every question." Unbelievable.

- OK, an 'I told you so,' if you don't mind here. When Governor Paterson met with AEG investor Rev. Floyd Flake the next business morning after the selection, I wrote that it was incredibly foolish and ill-advised. But I also maintained that it was nothing more than that, and that the bad press aimed at Paterson should have been reserved for the Senate Democrats instead. So, Voila! (Still floating from our Paris trip!) The Inspector General confirmed what we've all known - that Paterson was weak and passive in this matter - but also that he "adduced no nexus between the award to AEG and the Governor’s attempt to garner the support of Reverend Flake" (though that the "unfortunate timing" "undermined the perceived integrity of the selection of AEG."

The governor is portrayed as basically being clueless about the actual relative merits of the bidders; but the report accuses his advisors, of withholding pertinent information. The governor's General Counsel, Peter Kiernan, had a report from the Lottery which ranked the bidders in order of preference, with AEG being 5th out of 6 (and that's besides the fact that they were considered by Lottery to be unlicensable due to the presence of O'Farrell.) However, the report states, this information was deliberately withheld from the governor.

Consistent with Kiernan’s decision to not inform the Governor of the recommendations of the September 17 draft memorandum authored by the Budget Director and Governor’s Counsel’s Office, this new version deleted the recommendation contained in the original memorandum to commence negotiations with Wynn, and, if such failed, to proceed to SL Green, and to reject all other bidders including AEG.

The report also details testimony on the subject by Secretary to the Governor Lawrence Schwartz in which he repeatedly can't recall the events of oh, so long ago.

Schwartz further incredulously claimed to not recall myriad meetings he organized and attended, various e-mail correspondence between himself and other individuals, and numerous conversations in which he engaged, and claimed unawareness of the Governor’s selection of AEG despite personally engaging the Governor’s press office in a colloquy about the very subject.

The Inspector General, however, fails to even speculate as to why information was withheld from the governor as it was. But he doesn't let Paterson off the hook. "To the extent that this information was not sufficiently relayed to the Governor, fault lay in his choice of advisors and the directionless manner in which he acted to make his selection."

- Malcolm Smith recused himself early on after the reports of his ties to Flake and the Darman Group surfaced in the press. But the Inspector General is not buying it; in fact, at one point the word "recusal" appears in quotation marks, and he later refers to it as a "façade." The report relates several instances in which Smith received detailed information and charts about the progress of the process. And, the report references emails amongst AEG principals which "are replete with references to not only Smith’s support but his assistance."

For instance, on August 9, 2009, Larry Woolf, an AEG principal, wrote “It appears we have the support of Senator Smith, they have challenged his credibility due to past business with Rev. Flake. Hence, Sen Smith has formed a committee of four senators that will vote as one block for us. The Senators in that block are; Sampson, Adams; Abaddo; [sic] and Johnson.”

- Sheldon Silver revealed in his testimony with respect to the conditions that he placed on his approval of AEG, that he "was fully aware that the imposition of these conditions was tantamount to a denial of the Governor’s request that he accept AEG." So, then why didn't he just kill it than waste more time?

“I considered it, and then I determined that putting those conditions on it would probably have the same effect and would be better in terms of being consistent with what I had been saying all along,” that he had “no horse in this race.”

Nice to hear that Silver considered the perception of his neutrality ahead of the best interests of the public. The report further concludes that not only was Silver deficient in his judgment in that regard, but he was shirking his responsibility by law to act as one of the decision makers in the process.

..Speaker Silver was obliged to assert an active role to at least overtly eliminate vendors he found unacceptable and use his statutory authority to ensure that the most qualified bidder was awarded the franchise. Such action would have prevented the loss of much time, and expedited the infusion of urgently needed revenue.

- Senators Sampson, Smith, and Adams attended an affair shortly after the selection that was described by AEG as a "victory celebration."

It reflects, at a minimum, exceedingly poor judgment for these senators who were actively involved the selection of AEG to cast aside any pretense of preserving the appearance of objectivity and celebrate with AEG principals and lobbyists at the home of an AEG lobbyist paid to influence them in regard to a contract which had yet to be finalized.

OK, I'm tired of writing, and you're tired of reading, and we haven't even really gotten to Senator Sampson. I'm sure we'll have ample chance to detail the Senate Majority Leader's leadership role in the scandal (and his attempts to suppress the investigation) when the matter is brought up by the Legislative Ethics Commission (definitely) and/or the United States Attorney for the Southern District of New York (possibly....and, I might add, deservedly). Suffice....for now.... to relate these comments from Fisch:

"When Sampson appeared before us to answer questions, his testimony was incredible....I stopped counting the number of 'I don't recalls' when I reached 100." [NY Daily News]