Andrew Cuomo's $2 Million Man

How the Attorney General wannabe turned an accused slumlord into a sugar daddy

  The most important man in Andrew Cuomo's personal and political life, topping even his ex-governor father, is obscure, 46-year-old developer Andrew Farkas, who's ponied up over $2 million for the front-running attorney general candidate in recent years.

That includes $1.2 million in salary that Farkas's firm, Island Capital, paid Cuomo in 2004 and 2005, as well as over $800,000 in identifiable campaign contributions from varied Farkas companies, family members, and business associates. It does not include an undisclosed amount Island paid Cuomo up to June 2006, when Cuomo finally left the company, which specializes in Dubai and Caribbean luxury marinas. Cuomo's earnings tripled when he went to work at Island, where he's made more money than at any other time in his life.

Cuomo wants to become the state's highest law enforcement officer, but that hasn't stopped him from attaching himself at the hip to a onetime scandal-scarred kingpin of a housing empire he denounced himself when he was Bill Clinton's secretary of Housing and Urban Development (HUD). Cuomo personally authorized the filing of a civil suit by federal prosecutors in 1997 that accused Farkas's then company, Insignia Financial Services, of paying $7.6 million in kickbacks to the owners of 17 federally subsidized projects that Insignia managed.

Cuomo: His campaign for top cop is spearheaded by a fat cat he accused of kickbacks.
photo: Richard B. Levine
Cuomo: His campaign for top cop is spearheaded by a fat cat he accused of kickbacks.

The publicity-driven HUD chief so hyperventilated at press conferences about the scam that a federal judge had to put a stop to all the heavy breathing. Before the gag order was issued, however, Cuomo had already called the case "the largest ever brought by HUD" and denounced "the abysmal conditions" that he said tenants were forced to live with in the "poorly maintained" projects then managed by Farkas. Cuomo's press release said HUD's mission was to provide housing for the needy—"not to provide lives of luxury for con artists stealing from our programs."

The complaint, which the Justice Department filed "on behalf of the Secretary of Housing and Urban Development," charged that Insignia "submitted false statements" to HUD certifying that apartments in one project, Sierra Nevada Arms in Las Vegas, "had been inspected and were decent, safe, and sanitary, when in fact, the units were not decent, safe, and sanitary." Cuomo had visited that project in 1994 while an assistant secretary at HUD, and been so appalled by conditions that he says now he resolved that he "was not going to leave HUD without doing something" to hold those responsible accountable. In 1995, fueled by inspectors' reports, HUD seized control of the project, replacing Farkas's management firm and offering tenants vouchers to leave. When Cuomo announced the lawsuit two years later, he recalled the visit to Sierra Nevada, claiming he "saw a broken pipe literally spewing human waste on the children's playground." He said he saw children playing in it.

These conditions were directly connected to what the complaint called "the kickback scheme" involving Insignia, because "the money that changed hands was supposed to be used for reasonable operating expenses of HUD projects" but was instead diverted by Insignia to the owners, "who provided no services." Cuomo said the projects, which included Hill Manor in Newark, "were allowed to deteriorate into disrepair because funds were not spent on needed capital improvements and maintenance"—a consequence of the kickback diversion of a third of all the management fees HUD paid Insignia for these projects over six years.

The government briefs also contended that "the management certifications" submitted by Farkas's firm "did not disclose the fact that the management fee for each of the projects included a payback" to the owners. In fact, the government charged that the Farkas payments were "disguised" because they were actually made to entities set by the chief financial officer of the ownership entity, Associated Financial Corporation (AFC). Because of the "knowing" omission of these costly kickbacks from budgets Insignia sent to HUD, the complaint charged that the agency approved 15 rent increases that the company sought that were unrelated to the true expenditures at the projects.

Confronted with this history in a two-hour Voice interview, Cuomo said he'd told Farkas "numerous times," as they've grown close in recent years, that he "bought a disgusting portfolio" when he acquired the Sierra Nevada and other management contracts with AFC owners Bruce Rozet and Deane Earl Ross in 1990. "I believe that when he found out what he got into, the first thing he wanted to do was get out of it," Cuomo said, acknowledging that Farkas held onto the management deals until 1998, even entering into a new contract with AFC in 1993. "It was despicable," Cuomo conceded, referring to "the physical conditions" in the Rozet/Farkas projects generally, calling U.S. Shelter, the management company that Farkas acquired to get the Rozet contracts, "a garbage company."

Cuomo repeatedly mentioned that Farkas is "a financial guy" who he believes "never saw one of the properties he managed," suggesting that this distance made him less responsible for the conditions. "He doesn't do any management of anything. He's a roll-up guy who just acquires management deals," Cuomo explained. Pressed about why he would have such a close relationship with the manager of projects that galled him and compelled a signature lawsuit during his tenure as HUD secretary, Cuomo insisted: "If he ever walked into the Sierra Nevada, he would've had the same revulsion I had." Cuomo said his own focus was "all Rozet," a notorious landlord pursued by HUD for years before Cuomo was named secretary in late 1996. HUD had already forced Rozet to turn over the management of 79 properties to an independent firm, initially U.S. Shelter. Farkas's Insignia bought Shelter two months after the company signed its deal with Rozet, assuming the management of the properties.

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