Making Money Like Crazy

Out With the Poor, in With the Rich . . . and Into Lazio’s Coffers

Forcing New York's mentally ill out of public hospitals that once sheltered and subsidized them is nothing less than an insane financial bonanza for Rick Lazio, Al D'Amato, George Pataki, and their developer pals.

The latest deal struck by the Empire State Development Corp., a state agency chaired by Governor Pataki's chief campaign fundraiser, Charlie Gargano, was announced amid surprisingly little fanfare last week: The Hudson River Psychiatric Center, a breathtaking High Victorian castle built in Poughkeepsie during an era when some capitalists still felt a sense of noblesse oblige toward the less fortunate, will be sold, along with 100 other buildings and 315 verdant acres for a mere $1.9 million, to a group of developers who have contributed a flood of money to politicians.

Empire State's previous deal to sell Pilgrim State Hospital, the Long Island complex that once was the largest mental hospital in the Western world, came under fire last year after critics complained of Gargano's close ties to the winning bidder, Reckson Associates, whose owners are heavy contributors to D'Amato (and Lazio). The winner of another white elephant, the Long Island Developmental Center, was a venture controlled by Alvin Benjamin,another major financier of D'Amato and Lazio.

Records show that, in addition to Lazio's already tight relationship with big-time mortgage bankers, such as Lewie Ranieri, he started raking in cash from Reckson and Benjamin years before he started running for the U.S. Senate. Industries that are heavily subsidized by the federal government—like mortgage-bond trading—have poured money into the campaigns of Lazio, D'Amato, and other politicians who grant subsidies and relax government regulations. Lazio authored legislation ordering the poor to perform "community service" for their subsidies. No such rules exist ordering the subsidized rich to perform community service.

And some of these people making money off the government have engaged in ventures that turned out to be nuts. Arnold Moss, who heads the group that has purchased the Poughkeepsie hospital and grounds, is a former vice president of Integrated Resources, a high-flying, real-estate-based Manhattan empire, noted for paying its executives handsomely, that gorged itself on junk bonds in the '80s as a close ally of Michael Milken and the doomed Drexel Burnham Lambert firm and threw up all over itself in bankruptcy court in the '90s. Moss says he left Integrated in 1988, and the firm's founders, the slick Zises brothers—Selig, Jay, and Seymour—left in 1989, just before the firm crashed. When Milken's empire collapsed a short time later, Selig Zises led a propaganda campaign defending Milken.

In 1983, during Integrated's heyday, nine of its executives gave money to D'Amato during that year's last six months, when he raked in a total of $677,748 despite the fact that his next Senate race was three years away. The money was not for nothing. In late 1982, Congress approved an amendment by D'Amato to raise the mortgage limits that HUD would insure. The head of Integrated's mortgage-banking subsidiary praised the new limits.

Integrated is nothing but a bad memory, but the Zises are still heavy campaign donors, mostly to Democrats, but also to D'Amato. Likewise with Moss, who has funneled tens of thousands of dollars to political campaigns. He says he hasn't given money to D'Amato or Lazio. What about Pataki? "I gave to both of his campaigns for governor," says Moss. "I know it was less than $10,000—it was probably less than $5000."

Moss says he doesn't even know Charlie Gargano and he stoutly defends his winning bid for the Poughkeepsie architectural jewel. He says his group, Hudson Heritage LLC, will preserve the main building and most likely convert it into a "residential" property for "seniors" or a "hotel-hospitality" complex. The mental patients on the grounds will be consolidated on the complex's other acreage, which wasn't included in the sale.

Gargano's sale of Pilgrim to Reckson brought howls last year from losing bidders, who pointed out that Reckson's bid for Pilgrim wasn't even the highest bid. The Rechler family, which controls Reckson, has also poured money into Lazio's campaigns, as previously reported in the Voice.

Few complained about Gargano's deal with Alvin Benjamin, a major landlord and developer. It all fits: Gargano used to be chief fundraiser for D'Amato, who led the Nassau GOP machine, and Benjamin has been a major donor to the GOP. Money to D'Amato aside, Benjamin and one of his top people, longtime Nassau GOP politico Jack Libert, started giving money to Lazio five years ago, starting with $1000 each in 1995.

Lazio has always been the GOP's boy. A gaggle of top Republicans gathered in April at Pier 17 for a fifth annual "salute" to Pataki, where everyone talked about beating Hillary but Rudy Giuliani's name wasn't mentioned even once—and that was when Rudy was assumed to be her opponent. Giuliani's endorsement of Mario Cuomo over Pataki in the 1994 race sealed his doom with this crowd.

Last year, during a birthday party for D'Amato at Gargano's elegant Hamptons retreat, New York Post gossip Neal Travis reported that Pataki and his aides "displayed a kind of gleeful venom" about stopping Giuliani's Senate bid and running Lazio instead.

But Lazio, being a Long Island guy, still might have trouble with such city issues as rent control. An Albany newspaper reported five years ago that Lazio rented his campaign office from—who else?—Charlie Gargano.

In 1997, when interviewed by a CNN financial-news reporter about public housing, Lazio was asked whether rent control should be scrapped in New York City.

"Well," Lazio replied, "that's going to be a local issue, but there's no doubt that we need to ensure that we protect people of low incomes, seniors, and the disabled. People that are making . . . $250,000 a year, though, do not need rent protection."

A noble view, but hypocritical. Now wealthy, Lazio gets "rent control" from his landlord. The price of Lazio's spacious headquarters in downtown Bay Shore remains at a dirt-cheap $500 a month—as it has for several years.

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