Andrew Cuomo's $2 Million Man

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

Susan Gaffney, the HUD inspector general whose office initially uncovered the Farkas/Rozet payback arrangement in 1995, filed an affidavit detailing "a series of discussions" involving her office, Cuomo's Office of Housing, and Justice that "focused around the facts of the AFC/Insignia trans- action." She said "these discussions culminated in the pursuit of enforcement action against the parties, including the filing of the instant lawsuit and a negotiated settlement with Insignia." Gaffney's affidavit said that internal HUD and IG memos contained "recommendations regarding policy and enforcement options" that were "both complex and controversial" because fee-splitting was "a matter of first impression." Cuomo's general counsel Gail Laster also filed an affidavit, which echoed Gaffney's.

One federal prosecutor, who asked not to be identified, said that three close aides to Cuomo—Eisenman, Glaser, and Cuomo political attaché Chris Lehane—were "very encouraging of a settlement" and certainly never took the position, which agency officials sometimes do in similar circumstances, to "take this guy off to jail." Cuomo acknowledged that the three aides were involved and said, "I don't know if they encouraged a settlement." The prosecutor acknowledged that Justice and the IG agreed. "We were generally on the same page," he said. Even Farkas's Gilbert said the Justice lawyers he talked to were "consulting with people from HUD" continuously.

Cuomo derides any notion that he should be criticized for a settlement that Gaffney and Justice supported. Invoking the same language he used to describe Farkas's contracts with Rozet, he called it a "garbage charge."

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.

"I believed the settlement was helping to get Rozet, which is what everybody was telling me," he recalls. In fact, when the government amended the complaint against Rozet seven months after Insignia began cooperating, it didn't change a comma in the charges involving the Farkas/Rozet payments. All it added was that Insignia had also made one-third payments to another developer, Vincent Lane, the longtime head of the Chicago Housing Authority who wound up sentenced to two and a half years in federal prison on charges unrelated to this kickback scheme.

Of course, neither Gaffney nor anyone on the Justice side of the case wound up showered in Farkas largesse years after the settlement, making their decision uncontaminated by the questions that surround Cuomo's judgment. And none of them are now trying to use their HUD record as the rationale for becoming the state's top cop. The question is not whether the government should have cut this deal with Farkas, but whether a key player who approved it should subsequently make Farkas a personal ATM, as Cuomo himself might put it.

There are even indications that after the settlement, Cuomo may have taken actions that could have indirectly benefited Farkas and even the despised Rozet. What's beyond dispute is that in 1998, Cuomo recommended that the Justice Department grant amnesty to managers and owners of subsidized projects who voluntarily admitted to having participated in similar fee-splitting arrangements. The department wound up rejecting Cuomo's amnesty proposal, which, strangely enough, originated with Monica Sussman, the former Rozet and HUD attorney who's now with Gilbert's firm.

Sussman has conceded in a published letter that Cuomo called her in June—shortly after the final settlement with Farkas—and that, during a chitchat about ideas that might improve the department, she raised the "amnesty concept" with him. Sussman, who'd left the agency two years earlier, was still at Peabody Brown, which would merge with Gilbert's firm a few months later. Cuomo asked for more details and her firm sent a detailed draft a week later. Sussman says that the proposal would've required any owners who came forward to repay HUD half of the split fee while managers paid back the other half.

Gaffney was so upset about this amnesty effort that she cited it as the prime example of Cuomo's efforts to "undermine" her investigations in testimony before the U.S. Senate Committee on Governmental Affairs in September 1998, a charge that generated supportive comments from Republican and Democratic members of the committee. She said "an aide to the secretary"—later identified as Glaser, the signatory on the Farkas agreement—wrote Justice "proposing an amnesty program for the persons who were engaging in this behavior that had been the subject of our six-year investigation," referring to fee-splitting probes that preceded the Sierra Nevada discovery.

"No one, neither the aide nor the secretary, ever discussed this amnesty program with me," she testified. "I just got a copy of another memo that was written by an attorney for a law firm that has in the past represented some of these players, and the letter said—well, it is to Secretary Cuomo—'As a follow-up to our conversation last week, here is the amnesty program I am proposing,' and it was point by point, the amnesty program, then, that the aide had transmitted to the Department of Justice. I should also tell you that the secretary previously had made public statements about how this case demonstrated his get-tough policy." Gaffney convinced Clinton Justice officials to kill the Cuomo amnesty plan.

Cuomo sees no irony in the fact that he was pushing an amnesty plan suggested by a onetime lawyer for what he says were "a lot of the owners" possibly implicated in the payback schemes, including Rozet. He insists that the amnesty scheme "excluded people who were already caught," meaning it could not have applied to either Rozet or Farkas. Copies of the quickly rejected plan are unavailable, but sources then in the IG's office say it excluded schemes already charged, not individuals who may have been involved in fee-splitting that had yet to be specified in any court action.

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