By Albert Samaha
By Amanda Dingyuan
By Anna Merlan
By Anna Merlan
By Albert Samaha
By Tessa Stuart
By Anna Merlan
By Roy Edroso
Although the COIB's 2002 opinion required Bloomberg to sell his publicly traded stocks and his interest in a hedge fund and, "for the remainder of his service as mayor," invest "only in large, professionally managed mutual funds," on the day after Christmas in 2007, the COIB gave the mayor a holiday present, a second opinion that widened the list of "investment vehicles" he could use. The mayor, whose re-election rationale is his supposed grasp of the economic forces battering the city, requested in 2007 that he be permitted to start dabbling in hedge funds, private equity funds, and derivatives (both currency and interest-rate derivatives). Hampered by the restraints of the first opinion, Bloomberg wanted to embark into riskier markets just as they were about to implode.
Though some news reports say that Bloomberg has been forced to put his assets in a blind trust, and though city charter language suggests that such a trust might be appropriate in Bloomberg's circumstances, the 2007 decision explicitly exempts the mayor from any such requirement. Instead, at the request of his corporate and city attorneys, it permits Bloomberg to select an investment adviser (enter Steve Rattner, who also advises Times publisher Arthur Sulzberger Jr.) and empowers the mayor to "direct" those advisers "as to the allocation of funds among different categories of investments." He can also get reports from Rattner about how investments are performing by category. This opens the door wide enough that the mayor could conceivably have enough information to figure out if he has an interest in a company that comes before him in his official capacity.
Both COIB opinions barred the mayor "from all matters involving Merrill Lynch," his 20 percent partner in Bloomberg LP and a customer on the Top 100. Noting that Bloomberg "is clearly 'associated' with Merrill within the meaning of the charter," the first opinion "prohibits his using his city position to benefit Merrill." The Times reported two years ago that Bloomberg called Merrill's CEO, Stanley O'Neal, "one or two times" to offer his help in keeping the company downtown when it was thinking of moving to midtown, and then turned negotiations over to Doctoroff. Though the COIB has been aware for many months of Bloomberg's possible violation of this Merrill provision in connection with another development question—the investment bank's investment in the acquisition of Stuyvesant Town/Peter Cooper Village—it has not referred the matter to the Department of Investigation for review or taken any other action.
Bloomberg's handling of Stuy Town is significant not only because of what it suggests about his indifference to the letter of the law, but because of how he allowed a nest of his own intertwined relationships and hidden philosophical biases to damage a jewel of the city.
In the fall of 2006, amid a speculative frenzy that has since consumed world markets, the biggest real estate deal in history occurred on the East Side of Manhattan.
MetLife sold the 80-acre, 100-building, middle-income oasis called Stuy Town to a developer friend of the mayor's, Jerry Speyer, for $5.4 billion, a price tag at least three times the rent roll paid by the 25,000 people who lived in the 11,200-unit complex, the borough's largest. Anyone who could count knew the numbers would only work if Speyer could rapidly empty many of the 8,000 rent-regulated apartments and greatly increase prices, a result so predictable that tenants began filing lawsuits against Speyer as soon as he took over. Four appellate judges ruled unanimously this March in the tenants' favor in one key case, Roberts v. Tishman Speyer, which will be heard by the Court of Appeals in mid-September.
The mayor, mesmerized as ever by private deals involving 10 digits, called Speyer "a great landlord" and said, less than prophetically, "I think the tenants will be well-protected." Dan Garodnick, the understated City Councilman who lives in and represents Stuy Town, said last week that Speyer has "moved against people in 1,500 apartments and been forced to drop half the cases."
At the time of the sale, Garodnick got every major Democrat in the city and state at the time—including Chuck Schumer, Hillary Clinton, Christine Quinn, and Bill Thompson—to raise alarms about the sale's inevitable detrimental impact on the city's affordable housing stock and even to join him in championing a $4.5 billion bid put together by tenant and union leaders.
Bloomberg appealed to fans of the free market. "MetLife owns it, and they have a right to sell it," he declared before the sale occurred. "When you have a lot of people wanting to live there, prices go up" was another Bloomberg pre-sale explanation. "You always feel sorry for those who can't afford it," he mused on his radio show. "But those who can afford it say, 'Well, what about me?' " The Daily News called Bloomberg's comments an "endorsement" of the sale, and the Times later noted that "the Bloomberg administration supported Tishman Speyer's record-breaking purchase."
But Bloomberg wasn't just in favor of the sale. In fact, he and Doctoroff undercut efforts by others in the administration to come up with a proposal to save Stuy Town's affordable apartments. Emily Youssouf, the president of the city's Housing Development Corporation (HDC), said in August 2006, when MetLife formally put the project out to bid, that her organization could "use its reserves to make a loan to a buyer that would enable them, in turn, to offer the apartments to current residents at prices they could afford." Youssouf told the Times that MetLife "built the properties with the help of the city" and could "get the same price" from a city-assisted deal.