New York City Mayor Bill de Blasio is under pressure.
On Wednesday morning, the head of the city’s 9,000-person correction officers’ union, Norman Seabrook, was arrested by the FBI and charged with fraud. Seabrook has long been prominent and powerful in city politics and his arrest is a big story in its own right. But Seabrook’s downfall is also part of the sprawling, slow-moving, and in many respects mysterious legal drama that is playing out around Mayor de Blasio. The investigation that ensnared the union chief — as well as a hedge-fund manager who was allegedly paying him bribes — involves Jona Rechnitz, a real-estate developer and de Blasio donor who is also a key figure in multiple inquiries into the mayor’s fundraising practices. Alongside the news of Seabrook’s arrest were reports that Rechnitz had spilled his guts to the Feds in exchange for leniency in the Seabrook case (and potentially others that land in the future). The mayor was already living under a cloud of legal uncertainty and surrounded by brutal media cycles just as he was gearing up to run for reelection — yesterday just intensified all of that. But if you are like most New Yorkers, most of what you know about this angry pack of investigations dogging the mayor is that they exist. That’s understandable — there’s a lot of information to process, and objectively the situation is both complicated and confusing. But we’re here to help. Here’s a breakdown of what we know so far:
How many investigations are there, exactly?
There are five investigations (that we know about) being conducted by at least six different federal, state, and city entities, including the FBI, the offices of the U.S. attorney for the Southern District of New York and the Manhattan district attorney, and the Department of Investigation, a city anti-corruption agency.
And what is being investigated?
Many things, some of them murkier than others. The five overlapping inquiries are mostly related to fundraising by de Blasio or organizations affiliated with him.
Where did it all start?
De Blasio’s “perfect storm” seems to have started brewing a couple years ago, when federal investigators took an interest in the since-closed Hudson River Cafe owner, Hamlet Peralta, who was running a Ponzi scheme involving an almost nonexistent wholesale liquor business. (Peralta was arrested in April and charged with duping investors out of approximately $12 million.) The Hudson River Cafe was a popular hangout for top police officials, including former chief of department Philip Banks III (he resigned in late 2014), and the investigation into Peralta’s activities revealed that the restaurant received special treatment from the NYPD. Nine cops (four of them high-ranking) were recently disciplined as a result of the inquiry.
At around the same time, investigators were looking into claims made by a former correction officers’ union board member, William Valentin, who had accused Seabrook (the guy who just got arrested) of making shady investments with the organization’s money. Banks and Seabrook are longtime friends.
Banks and Seabrook were also friendly with real-estate developer Jona Rechnitz and consultant Jeremy Reichberg. Investigators eventually discovered that the two police officials accepted expensive gifts and trips from Rechnitz and Reichberg, possibly in exchange for favors like security details for events and deliveries, ticket-fixing, and an NYPD helicopter flyover to impress some party guests.
Here’s where Wednesday’s busts of Seabrook and Murray Huberfeld, the hedge-fund manager, come in. Seabrook did allegedly funnel millions from the correction officers’ pension fund to Huberfeld’s firm in exchange for kickbacks. Sources revealed that Rechnitz introduced the union chief and the financier and acted as an intermediary in that bribery scheme. Rechnitz has now pleaded guilty to fraud in this case and is cooperating with investigators for leniency.
So where do the mayor come in?
Rechnitz and Reichberg were both big de Blasio donors who served on his 73-person inaugural committee. “Mr. Rechnitz and his wife each contributed $4,950, the maximum amount allowed, to Mr. de Blasio’s 2013 campaign, and Mr. Rechnitz also raised about $45,000 for the mayor,” according to the New York Times. “Through a company he controls, Mr. Rechnitz also donated $50,000 to the Campaign for One New York, a nonprofit that supported Mr. de Blasio’s agenda. In May 2014, Mr. Reichberg held a fund-raiser at his home for the Campaign for One New York, raising $35,000.” Rechnitz also gave $102,000 to de Blasio’s effort to get more Democrats elected to the New York State Senate (more on that, as well as the Campaign for One New York, in a bit).
It appears that the FBI and the Manhattan DA are now trying to figure out whether Rechnitz’s and Reichberg’s donations resulted in any favors from City Hall. U.S. Attorney Preet Bharara, after formally filing charges in the Seabrook case, indicated that Rechnitz “is assisting other investigations as well; that’s all I’ll say.” The same team of FBI agents and prosecutors who conducted the inquiry into Seabrook are also looking into de Blasio’s fundraising, reports the Times.
Meanwhile, de Blasio, who described his relationship with the two men as “not particularly close,” has returned the money from Rechnitz and his wife. The mayor said again on Wednesday that regretted his association with Rechnitz. “I wish I never met the guy,” de Blasio said. “If we had any inkling that this was the kind of human being he was, we never would have gone near him.”
As for the suggestions of quid pro quo, the mayor has said, “I hold myself and my administration to the highest standard of integrity. We are very, very careful about doing things in a legal and appropriate manner.”
So, that’s the first investigation.
What was the Campaign for One New York?
The Campaign for One New York was a nonprofit group created to advocate for de Blasio’s policy goals, including universal pre-K and his affordable-housing plan. From the Times:
The group has raised and spent more than $4 million since its creation in 2014, according to voluntary disclosure forms. Donations included at least $1.3 million from unions, including $350,000 that the American Federation of Teachers gave during the mayor’s push to create universal prekindergarten, and more than $1 million from real estate interests, including Two Trees Management and others with interests along the Brooklyn waterfront.
According to Politico, “More than two-thirds of the donors to the nonprofit had some form of business before the city.” In February, the watchdog group Common Cause of New York called for an investigation into the Campaign for One New York, saying, “We’ve asked the Conflicts of Interest Board to determine whether the mayor setting up a shadow government is actually a violation of specific provisions of the conflicts of interest law. We don’t believe that dark money is a necessary function of the modern mayoralty.”
In March, the Campaign for One New York announced that it had accomplished its goals and would be shutting down. “The work is done. That’s the bottom line,” said de Blasio.
That seems a little convenient.
It does, especially when you consider that the Campaign for One New York factors heavily into at least two of the de Blasio–related investigations.
Which investigations are those?
Here’s the first one: In 2014, de Blasio tried to shift the balance of the majority-Republican State Senate by backing three Democratic candidates in Ulster and Putnam counties. (His candidates all ended up losing.) In response to complaints by Republican officials, the New York State Board of Elections launched an inquiry into de Blasio’s efforts. In April, it was reported that the board had found evidence of “willful and flagrant” violations of campaign-finance laws, and that the Manhattan DA was looking into whether criminal charges were warranted.
From the Times:
The board’s report says that the fund-raising effort was run out of Mr. de Blasio’s City Hall and involved Emma Wolfe, his top political aide, and Ross Offinger, a fund-raiser for the mayor’s election campaign as well as the Campaign for One New York, a nonprofit created by Mr. de Blasio to support his agenda. The report also names several union officials and political consulting firms, including BerlinRosen, which has longstanding ties to the mayor.
It says that those people worked closely with the candidates and their campaigns in arranging for large donations to be made through the county and statewide committees, and then designated how the money would be spent. Some of the checks to the statewide committee included notations such as “Donation per Mayor,” the report said.
According to state rules, donations to individual campaigns must be limited to $10,300, but donors can contribute as much as $103,000 to party committees, which can pass as much money as they want to their candidates. Over the course of the 2014 election season, the Democratic committees in the counties where de Blasio was supporting candidates received huge influxes of cash. “In the five years prior to 2014, the Putnam County Democratic Committee received an average of about $10,016 a year in contributions. In 2014, the committee received $671,330. Almost all the funds were disbursed within a few days after being received to the campaigns of [Justin] Wagner and [Terry] Gipson,” reports the New York Daily News. “The Ulster County Democratic Committee received an average of about $37,021 in the five year before 2014. In 2014, the committee received $390,317, most of which was quickly re-routed to [Cecilia] Tkaczyk’s campaign.” Many of the contributions came from people or organizations who had never before donated to those committees.
According to the Board of Elections, the pattern suggested de Blasio and his associates may have been trying “to evade contribution limits and to disguise the true names of the contributors, conduct which may violate Election law.”
De Blasio, for his part, responded by saying, “If there’s any kind of investigation going on, we’ll happily participate. We’ll support it. We want to get everything out. We want every fact uncovered … From my vantage point, everything was done legally and appropriately.” But the situation became more contentious when he accused the board’s head, Risa Sugarman, of leaking a memo on the investigation’s findings in order to make him look bad. (Sugarman was appointed by Governor Cuomo, and de Blasio and Cuomo have a well-documented not-great relationship.) Last week, an inquiry by New York inspector general Catherine Leahy Scott revealed that the board’s spokesperson, former Republican Senate aide John Conklin, was the person responsible for leaking the materials. Sugarman and Cuomo have both demanded an apology. De Blasio’s office has refused, saying that it’s leaky Board of Elections that “owes the people of New York an apology for such a flagrantly political act.”
And that’s not the only inquiry involving the Campaign for One New York?
Nope. New York State’s Joint Commission on Public Ethics is investigating the Campaign for One New York for a possible violation of lobbying rules. The organization came under scrutiny in May 2015 when it failed to register as a lobbyist, as it had the year before.
“Groups are required under state law to register with the panel within 15 days if they reasonably anticipate spending more than $5,000 on lobbying activities,” explains the Times. At the time, a spokesperson indicated that the Campaign for One New York didn’t intend to do any lobbying. However:
… In some of their materials, including two fund-raising letters obtained by The New York Times, the group has said it will work to ensure that Mr. de Blasio can retain control of the New York City school system, a goal that requires the approval of the State Legislature.
In March, a solicitation letter mailed to potential donors stated, “The Campaign for One New York will continue to support the mayor as he works for renewal of mayoral control of schools.” The letter also refers to securing “fair funding for New York City schools,” also a legislative matter, and supporting the mayor’s affordable housing plan, including “approvals at the state level.”
The FBI also has some questions about these rat-proof trash bags.
The Campaign for One New York’s lawyer, Laurence Laufer, recently said that “[w]e will no longer cooperate” with the investigation, which he called “a blatantly political exercise by an agency whose very independence is deeply in question.” While he didn’t call him out by name, Laufer made it clear that he believed Cuomo was behind the probe.
How many investigations do we have left?
Just two more.
In April, New York State attorney general Eric Schneiderman began investigating the sale of the building at 45 Rivington Street. (Comptroller Scott Stringer and the Department of Investigation are also looking into this one.) The building, known as the Rivington House, was long subject to a deed restriction requiring it to be used as a nonprofit residential health-care center, and had for years been an HIV/AIDS facility. Recently, the Department of Citywide Administrative Services lifted the restriction. From The Wall Street Journal:
In early 2015, the Allure Group, a for-profit nursing care provider, purchased the building for $28 million, and months later paid the city $16.15 million to remove the restrictions that limited the building’s use, records show.
About three months after the city lifted the restrictions, Allure sold the building for $116 million to a residential developer that plans to convert it into luxury condominiums, over the objections of some community leaders.
The department claims that it only lifted the restriction because it was misled by Allure, which said the building would remain a hospital (albeit a for-profit one) and did not reveal its plans to turn it into condos. De Blasio has said that he was not aware of the lifting of the restriction when it happened: “Someone should have said no farther down the food chain, and if they didn’t know how, they should have come to me and I would have said no very, very quickly. I want to know the same answer you’re looking for.”
This week, Schneiderman’s office announced that it would try to stop the sale of two more nonprofit nursing homes (one in Harlem and one in Coney Island) to Allure, citing the “misrepresentations” made by the company in the 45 Rivington deal: “Until we conclude our investigation, we will object to Allure buying additional nursing homes.” This indicates that the attorney general believes that Allure was, in fact, dishonest with city officials.
And last but not least …
The fifth investigation is related to de Blasio’s weirdest and most never-ending problem: his campaign promise to ban the Central Park horse carriages.
When de Blasio made that ill-fated pledge, the animal-rights group NYCLASS spent a lot of money to attack his rival, Christine Quinn. The two principals of NYCLASS, Steven Nislick and Wendy Neu (both of whom have also donated large sums of money to the Campaign for One New York), are also involved in the real-estate industry. The Times reports that “investigators are looking for any favorable municipal treatment granted [to Nislick and Wendy Neu] in exchange for the spending.”
Meanwhile, the Daily News reports that the FBI is looking into whether two men who are close to de Blasio (one is de Blasio’s cousin, John Wilhelm) used NYCLASS to improperly funnel money to an anti-Quinn group, New York City Is Not for Sale, during the mayoral campaign.
“Everything we’ve done, we’ve done legally and appropriately,” said de Blasio when asked about his relationship with NYCLASS. “And I’ve said we will fully cooperate with any investigation.”
So what now?
De Blasio appears to be hunkering down a bit, with some reports suggesting that the investigations have become an understandable “distraction” for the mayor. A recent Quinnipiac poll said that 52 percent of voters believe that political corruption is a “very serious” problem in NYC, while 34 percent called it “somewhat serious.” 55 percent of those polled said they thought that de Blasio “does favors for developers who make political contributions to campaigns in which he is involved.” With the mayor due to begin his reelection bid soon, potential challengers are likely factoring the scandals into their decisions about whether to run against him.
However, during a press conference last week, the mayor insisted that it was pretty much business as usual at City Hall. “When all the facts come out, I’m confident that it will confirm things were done the right way,” he said. “Meantime, what I focus on is what we call the day job….How we are going to keep lowering crime, how we’re going to create more affordable housing, what we’re doing to improve our schools. That’s where the focus is. The truth is a very comforting thing.”