By Jared Chausow
By Katie Toth
By Elizabeth Flock
By Albert Samaha
By Anna Merlan
By Jon Campbell
By Jon Campbell
By Albert Samaha
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.
Gattoni met Zaccaro in 1987, spotting him with Ferraro on an airplane flight from Vermont. He initially tried to interest Zaccaro in a Vegas property, and over the years, he stayed in touch, eventually calling Zaccaro to offer the options on the two parcels that now comprise the hotel site. Zaccaro concedes that their deal, from the beginning, was that Gattoni, who gave Zaccaro a financial statement listing a mere $6000 in assets, would coordinate the project day-to-day, while Zaccaro would pay the immediate expenses and arrange the long-term financing.
The Zaccaro-Ferraro family is by now so deeply committed to the project that it has as much as $2.3 million tied up in it. The stake includes four liabilities recorded on Ferraro's disclosure statement that top out at over $1 million. Those have been collateralized by everything, from the family home in Queens to the office Ferraro jointly owns with Zaccaro. In addition to borrowing to get the hotel off the ground, Ferraro's filing cites a Zaccaro loan to North Stonington of as much as $500,000, as well as his $250,000 cash purchase of a third parcel adjacent to the site in May 1997.
With her own financial well-being riding on the casino-related project, Ferraro unabashedly championed casinos in one of her final CNN appearances on Crossfire. On December 26, 1997, without ever mentioning her own stake, she ridiculed Tom Grey, head of the National Coalition Against Gambling, saying there are also "compulsive shoppers," and asking if Grey would "close down every mall" because of them.
Citing how much her 90-year-old mother-in-law loved Atlantic City, Ferraro said, "People believe it's helped them, for instance, on some of these reservations where Native Americans now are making good money." When Grey replied that all Foxwoods has produced are 500 Indian millionaires, Ferraro said the "reservations were starving," and "the kids were not being educated," suggesting that the casino was "helping" and "has been a benefit." She unconditionally endorsed gambling as "entertainment."
Pressed by the Voice about why Ferraro did not mention her North Stonington investment on CNN, a Ferraro spokesperson told the Voice that the project was "not casino-related," tying it instead to Mystic Seaport, nearby golf courses, and a possible amusement park. Her attorney, however, in an appeals brief filed this month in Connecticut, said the location was "unique" solely because "it is adjacent to the Mashantucket Pequot reservation and casino."
Beyond the nastiness of Gattoni's treatment, Ferraro's association with the hotel project, just like her partnership with Zaccaro in a building tenanted by pornographers in 1992, has exposed her to the trademark trappings of most Zaccaro deals: A convicted felon has been spearheading the project. It features questionable tax maneuvers and curious loans.
In addition to replacing Gattoni with John Zaccaro Jr., who was convicted on felony drug charges in Vermont in 1988, Zaccaro increasingly began to rely on another felon, Emmet Delany, to push the project. In 1992, Delany pled guilty in White Plains to five federal felony counts, ranging from witness tampering to mail fraud. He started working as Zaccaro's agent on the hotel project in early 1996 and was deeply involved for at least two years, negotiating a management contract with Crowne Plaza to run the hotel, and meeting with investment and mortgage firms about financing it.
Zaccaro's office, where Ferraro has maintained a desk since at least 1986, takes messages for Delany, who cooperated with the government in making numerous real estate fraud cases. He was not sentenced until May 1997, when he got two years probation and a $4000 fine on each of three remaining counts. Delany was represented by the same law firm that represented Zaccaro in his last criminal case in 1987, when he was acquitted on bribery charges involving the city's cable contract. The firm -- Morvillo, Abramowitz -- remains so close to the family that its members contributed $5000 to the Ferraro campaign.
Ferraro's spokesperson attempted to put some distance between Zaccaro and Delany, indicating that Delany "has absolutely no role in the family business" -- a denial dependent on the tense of the verb. Zaccaro testified in October that Delany was still working for him then, one of a hundred references to Delany in the transcript. If the disbarred attorney has since departed, the secretary who answered the phone last week didn't know it.
Ironically, with all this criminal baggage on the Zaccaro side of the dispute with Gattoni -- including Zaccaro's conviction on a fraud misdemeanor charge -- it was Zaccaro who hired detectives to investigate Gattoni at the time of the split. Zaccaro conceded in testimony that he'd even invited Gattoni to dinner at his son's restaurant, obtained a copy of Gattoni's credit card number, and run a credit check on him.
Indeed, Zaccaro detectives looked unsuccessfully in several states for a criminal record on the mysterious Gattoni, whose prior business and current whereabouts are unknown even to members of his family contacted by the Voice. After reimbursing Gattoni's "expenses" for years and forming three corporations with him, Zaccaro suddenly decided, as he put it, that he "didn't know Gattoni very well," and launched a belated but full-scale search for usable negatives.
Previously, Zaccaro had shown no concern about Gattoni's amorphous past, or Delany's conviction, or even his own and his son's criminal history, though the hotel project was closely tied to the highly regulated casino industry. According to former Foxwoods president G. Michael Brown, Zaccaro met with him to actively pursue a block-of-rooms rental relationship with the casino, which might have subjected the hotel's ownership and management to regulatory review.
It would not just be Zaccaro's yellow sheet that might attract enforcement attention. It would be the parade of thugs who've trekked through Zaccaro's 218 Lafayette Street office, some dealing directly with Ferraro, including Luchese soldier Michael LaRosa, Gambino capo Joe LaForte, Gambino associate Lawrence Latona, Chinatown gangster Eddie Chan, porno racketeer Robert DiBernardo, and mob-tied fixer Harold Farrell. Delany is just the latest recruit to a corporate culture of crime that has inevitably tainted a wife who put her shingle up there, and is a partner -- as well as a frequent officer -- in virtually every entity headquartered there.
But it's not just grimy associations that accompany Zaccaro deals. Zaccaro testified that he had two appraisals done of the North Stonington property within four months of each other in 1995 -- the first pegging the value at $4.2 million and the second at $600,000. Questioned under oath why he did two, Zaccaro freely admitted that "one is market value and one is for tax purposes," an admission that might tantalize an auditor.
Ferraro's tax returns and disclosure statements, both of which are sworn submissions, differ on the percent of her interest for the same year. For example, the return for 1993 gives her and Zaccaro a 21.8 percent share, while the disclosure form she filed as U.S. Ambassador to the United Nations Commission on Human Rights gives her 12.5 percent. In 1995, she's listed at 20.5 percent on one form and 13.5 on another.
More importantly, her share on her tax returns changes from year to year, as do the reported holdings of other family members, and the testimony of John Sr. and John Jr. suggests that the family accountant comes up with a number for each.
Without any stock issued or any other documentation of the family's percentage shares, the tax returns alone appear to define their interests, and the tax losses which each member claims on the project have a lotterylike quality to them, making Ferraro's write-off appear to be just like one of the "loopholes and injustices" riddling the tax system which she denounced in her January announcement speech. Ferraro's spokesperson didn't deny the shifts in percentages, just insisted they were "proper."
Grilled about these fluctuations in depositions, Zaccaro threw up his hands, passing on question after question about his, Ferraro's, and the family's stake. "I have no idea" how to explain the percentages, he said. Neither he nor his son could explain the $65,000 loan Zaccaro Jr. supposedly made to the company at the same time that his Soho restaurant was sinking in a million dollars of Zaccaro Sr.Ðabsorbed debt. Though no evidence was produced that the loan was made, he was certainly repaid, and the senior Zaccaro conceded: "I don't know how he did it but he paid the money."
The only justification Zaccaro has offered for the Gattoni coup was that he was "furious" at him because Gattoni had signed a contract extension with an investment firm that had a time-limited exclusive arrangement with Zaccaro. Zaccaro said he dismissed Gattoni in a 14-minute phone conversation as soon as he learned about the "unauthorized extension," confirming it in the shareholders' October resolution. As an after-the-fact rationalization, Zaccaro has also blamed Gattoni for failing to secure a sewer permit, though in the nearly two years since Gattoni's departure, Zaccaro's been unable to get one either. In any event, Zaccaro admitted on the stand that he'd refused to fund the sewer options Gattoni brought to him.
The real problem in '96 was that Zaccaro had just obtained a third appraisal, raising the land value to $6.4 million, and that Gattoni was getting in the way of finding the financing that the appraisal was done to generate. Investment firms looked askance at a significant partner with no wherewithal. Delany was urging Zaccaro to cut Gattoni to 5 to 8 percent. Zaccaro had sought all sorts of local, state, and federal assistance for the project without success, and the carrying costs were killing him. Once vital, Gattoni had become baggage.
Gattoni's attorney described the gradual reduction of his holdings as "a plan to bleed this man." His complaint alleges that Ferraro "colluded with Zaccaro to deprive Gattoni of any interest" and "converted the capital and real estate to the detriment, damage and injury" of their onetime partner. It is lawyer's language, but there is a human bite to it.
The woman who would be senator has made a career out of hostile denials about the escapades she joins in with her husband. They got her in trouble with the House Ethics Committee and the Federal Elections Commission in the mid '80s. Her only response to the mob charges in 1992 was that they were anti-Italian. Her know-nothing defense forced the Times's Maureen Dowd to conclude, "She does not seem to feel that as a former prosecutor, a public official and a savvy woman who was listed as an officer in her husband's real estate company, she should have made it her business to know more about 'John's business.'"
Everywhere you look, and every time you look, there is another Ferraro scandal, as inevitable, it seems, as her teeth-clenched determination to run again for the public mantle she surrendered in 1984. It is an arrogance of entitlement born in a grand moment the women of America will never forget.
With special reporting by Anne Benjaminson.
Research: Michael Kolber, Dan Steinberg, Nicole White