By Jared Chausow
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At that meeting, four members of the Zaccaro-Ferraro family and two outside investors would approve a seven-page bylaw amendment designed to strip their only other partner of the interest he held in a $50 million hotel development near the Foxwoods casino in Connecticut -- by far the most costly and potentially lucrative Zaccaro-Ferraro deal ever. The "cash call" that the family okayed that day demanded a $34,400 capital contribution from Charles Gattoni, the only shareholder unrepresented at the meeting.
Since Zaccaro knew, as he later conceded under oath, that Gattoni was penniless and unemployed, the sudden change in the operating agreement requiring immediate financing from each shareholder could have no other effect than to drive Gattoni out of the project he'd created six years earlier. Zaccaro would later testify how "bad" he felt about gutting Gattoni, who'd found the property and secured the zoning for what an appraisal called "the only full service hotel site" anywhere near the most profitable casino in the country. Zaccaro did not, however, feel bad enough to rescind his actions against Gattoni.
Instead, the North Stonington corporate amendment continues to empower shareholders to cheaply acquire the stock of anyone who can't pony up, positioning Zaccaro to redistribute Gattoni's holdings as he chooses. And that redistribution may well have been completed last Thursday, when another shareholders meeting occurred to finalize the "cash call." A Zaccaro attorney declined to say what happened at the meeting.
In 1996, Zaccaro had already shifted 25 percent of the company's stock from Gattoni to Ferraro and himself -- an act that Gattoni challenged in the Connecticut litigation that has stalled the project. Ferraro participated directly in that dubious maneuver, signing an October 25 North Stonington resolution that simultaneously dumped Gattoni as comanager of the project and replaced him with her son John Zaccaro Jr. Ferraro's tax returns, filed a few months later, reflected a 25 percent jump in her holdings. But by the time she announced for Senate on January 5, Ferraro had removed herself from an active role in the company, writing a September 1997 letter that assigned her rights to Zaccaro. That reassignment kept her clear of the January "cash call" vote, though her office told the Voice she was "aware" of the "purely coincidental" timing of the meeting.
But Ferraro's withdrawal was a token gesture. The tax returns and federal disclosure statements she filed in April and May of 1998 reveal that she's retained her 38.5 percent interest in the project, held jointly with Zaccaro and valued at up to $1 million dollars on her forms, more than any other holding. When questioned in a Connecticut deposition about Ferraro's September letter, Zaccaro explained: "To be honest with you, until this is over, you're looking for publicity, she's not," adding, "I think she has an interest anyway."
Zaccaro also testified about the 1996 resolution -- cosigned by Ferraro -- that terminated Gattoni, indicating it was okayed either at the family home in Queens or at Beth Israel Hospital, where the whole family had gotten together for the birth of a granddaughter. Zaccaro got the signatures in between squeals from the newborn.
A year later, Zaccaro was asked on the witness stand if he could point to any provision in the lengthy operating agreement that gave him the power "to throw out a minority shareholder at your desire." Zaccaro confessed, "I don't know." Asked if he was aware that Gattoni's father had died within days of the decision to terminate Gattoni, Zaccaro said, "I heard about it, yes." Asked if he'd received Gattoni's letter rejecting the unilateral reduction of his holdings to 10 percent, Zaccaro said he had, but did it anyway. The fact that Gattoni had assented to two earlier cuts -- reducing his original 50 percent share to 35 percent -- apparently meant nothing to Zaccaro.
While Zaccaro, as principal shareholder, arguably had the authority to fire Gattoni, his attorneys have yet to cite any legal basis for slashing Gattoni's share to 10 percent. Since the "cash call" eliminating even that remnant has yet to be finalized, much less challenged in court, there is also no evidence among the thousands of pages of transcript of its legality.
Gattoni, who was never paid a dime by Zaccaro though he worked for more than four years securing a variance to build a 400-room hotel in an area otherwise limited to 200-room facilities, is opposing the reduction of his share. But the court cases have so far focused on his own ill-conceived response to Zaccaro's actions, especially his attempt to transfer the title for the property back to the original entity he and Zaccaro had shared 50-50, and he is losing the early rounds.
The testimony establishes, however, that it was Gattoni who went looking for a hotel site the day Foxwoods opened, betting on a casino whose success was then widely doubted, and brought the North Stonington site, six miles away on Route 2, to Zaccaro in March 1992. That's when Ferraro became a partner in the venture too, though embroiled at the time in her run for the senate.