Bloomberg Keeps His Billions Separate From His Mayoral Obligations? Yeah, Right!
No mayor may be able to top Rudy Giuliani's public worship of New York's Bronx baseball team, but with the Yankees seemingly headed to the playoffs again, the current incumbent will no doubt at least make an effort.
As a result, the image of Mike Bloomberg hamming it up in a first base box will be beamed into city homes this October, right before election day. And for many viewers, that image will be carried on their local cable-network provider.
For most of New York, that provider is Time Warner.
Funny thing about the Yankees on your Time Warner cable box. A few years ago, the Yanks were in a murderers' row with several other sports channels. Mets games are broadcast on SNY at 26. MSG, the Madison Square Garden Channel, owns 27. Sports heavyweights ESPN and ESPN2 have 28 and 29.
And batting cleanup (more or less), at channel 30, was the YES network that broadcasts the Bronx Bombers.
In cable, it's common to group channels by genre. The thinking goes that each of them benefits from proximity to the others.
But the Yankees, easily the most popular pro sports team in town, recently got pulled out of that lineup like a light-hitting shortstop struggling below the Mendoza line.
In March 2008, the Yankees were suddenly banished from the sports oasis on your cable dial, pushed all the way up to channel 53.
That puts them just after the Learning Channel and just before AMC, a very mysterious exile from cable's sports landscape.
Until, that is, you consider what took its place.
March 2008, when the switch was made, was also just six short months from a major date concerning your local cable provider: It would mark the end of Time Warner's 10-year contract with the city of New York.
It's almost a year now since that date came and went. The city, however, is still slowly negotiating a new contract, probably the most lucrative in the country. For many reasons, the delays have already worked to Time Warner's advantage.
You can be sure that Time Warner believes that its decision to bump the Yankees and move a minor news network all the way from channel 104 to a prime spot on the dial carries some weight with the city and the man who runs it.
And that's because Mike Bloomberg, besides running New York, also owns a company called Bloomberg LP, which happens to run a little business-news network called Bloomberg TV.
Which you can now find on your cable system at channel 30.
Because Bloomberg is not only the mayor but also the richest man in New York, he agreed to several conditions when he took office in 2002. In order to make sure that his decisions about the welfare of all New Yorkers would not be complicated by his personal business welfare, he was required by the city ethics board to sell his publicly traded stocks and his interest in a hedge fund. Much was made in the media of how well the billionaire, and the city he ran for a salary of a dollar a year, had been sealed off from his (potentially corrupting) billions.
After nearly two full terms, however, the walls between the mayor's money and his public office that once looked so strict have appeared more and more porous. In some cases, like with Time Warner, that may not have been Bloomberg's doing. And in others, it may not have even been what was on his mind. But as he nears a third term, there's little doubt that Bloomberg's business interests have become increasingly intertwined with his government, a conflicted marriage unprecedented in the life of the city and unchecked by an independent overseer.
One of the rules Bloomberg agreed to was that he would keep his hands off "all matters involving cable television."
While Bloomberg has backed wholesale deregulation and higher rates for cable, saying that carriers "don't make a lot of money," there is, in fact, no evidence that Bloomberg has ever personally intervened in the decisions about the three national companies that have contracts with the city. But it's clear that his network did benefit, mightily, from Time Warner's channel change.
It's also true that television is increasingly important to Bloomberg LP's long-term business plan. Until Bloomberg's most trusted aide, Deputy Mayor Dan Doctoroff, announced his departure from city employment, he had overseen the city's cable franchises (his designated successor, Ron Lieber, does that now). Doctoroff left the city to become president of Bloomberg LP, where he has made the revamping of the television operation a top priority, bringing in NBC's Andrew Lack and adding Charlie Rose.
Two months after Doctoroff was installed as Bloomberg LP's president in January 2008, the Time Warner channel switch happened.
There's no way to tell if Bloomberg TV's move from channel 104 to channel 30 on New York's dial has improved the network's ratings, since Nielsen doesn't release them. But cable experts say that the move was certainly designed to enhance the network's advertising potential in Manhattan, where the people who make ad-buying decisions are much more likely to notice the station now than when it was in triple digits. Meanwhile, in the rest of the country, Bloomberg TV remains in the cable hinterlands: It's still at 224 in Los Angeles, 252 in San Diego, 246 in Boston, and, like it once was in New York, 104 in New Jersey. (Cablevision, which has the city contract in the Bronx and parts of Brooklyn, has Bloomberg TV at 105.)
In addition to the expiration of its New York contract, Time Warner was also facing another major change last year: launching a $9.5 billion spin-off of its cable interests to its wholly owned subsidiary, Time Warner Cable. The contract with Time Warner provides that the franchise cannot be transferred "without the prior written consent of the city." Time Warner never sought such consent, even though the spin-off was completed in February and proposed in 2008. So the city is allowing Time Warner to retain the contract in its name even though it's out of the cable business. Bruce Regal, the city attorney on the cable deal, calls this "a unique circumstance," adding that Time Warner "continues to be ultimately bound by these franchise obligations regardless of the spin-off." The pretense that Time Warner is running a cable system it sold, and that Time Warner Cable isn't running the system it owns, has the ring of favorable treatment about it.
Comptroller and mayoral candidate Bill Thompson says that the delays do as well. He has written two letters to the Public Service Commission, one before he squared off against Bloomberg, contending that Time Warner is deliberately delaying a deal and accusing the city of "not aggressively" moving to stop it. As a member of a committee that reviews city franchises (and is dominated by mayoral appointments), he was able to impose new consumer protections in a contract for another cable carrier last year. The delays have allowed Time Warner Cable to avoid the imposition of the same protections. If a third extension is granted this month, as Regal anticipates, whatever deal the city cuts is likely to occur after the November election. Thompson told the PSC that he's "extremely troubled" by these delays. Besides dragging its feet, the city also filed no objection when Time Warner successfully petitioned the Federal Communication Commission last year to end city regulation of its customer rates. Thompson's office also found this "troubling," though Regal said any objection would have been "futile."
Beyond Time Warner and Bloomberg TV, there's one other party affected by the switch: the YES Network, which is partially owned by the Yankees.
The Yankees, of course, may owe more to Bloomberg and Doctoroff than any other company in New York. Not only did the city dump public money into the new stadium, but the administration has been accused of illegally adjusting land appraisals to justify additional public bonds for it.
Did the Yankees or YES do Bloomberg a favor with the channel switch?
Yankees and YES officials say they did not like moving up the dial. Time Warner spokeswoman Harriet Novet says the company had "made that change together with the YES Network" under the terms of its "contractual agreement." A former Time Warner executive confirmed that, by contract, YES would have to be consulted before it could be moved away from the Mets channel, SNY (in something known as a "proximity clause").
Ray Hopkins, YES's chief operating officer, says that his network "didn't realize who was coming in" until after the cable company informed him that the switch was being made. But after repeatedly being asked if YES had the right to refuse the move, he declined to answer until finally saying, "Going down this path is dangerous for me" because of confidentiality rules associated with the contract.
Howard Rubenstein, the powerful publicist who represents Bloomberg LP, YES, and the Yankees, says, "The Yankees had no idea about the switch until the matter was concluded."
"It was handled strictly by YES," he adds, but he would not address YES's acquiescence to the change other than to say that "YES didn't want to pay for lower channel placement," which suggests that it had the option of staying on channel 30 at a higher fee.
A Bloomberg LP spokeswoman says the company requested the switch and paid Time Warner for it, but she declined to provide any details or offer examples of elsewhere in the country where it had achieved a similar change in its dial position.
Everything Mike Bloomberg does—his three campaigns, his hundreds of millions a year in charity, even his public career—springs from his global company, Bloomberg LP, which has been called the Google of financial data. It does $6.2 billion of business a year and usually earns a 30 percent profit. He owns a hoggish 85 to 92 percent of it (depending on whom you believe).
Bloomberg planned his first mayoral campaign from his corporate offices. He began thinking about running as early as 1997, and eventually assigned the management of this uncertain enterprise to three of his aides at Bloomberg LP who would all eventually become deputy mayors: Patti Harris, Kevin Sheekey, and, to a lesser degree, Ed Skyler. This synergy was infectious: The company created a news division to cover the city at the same time that its owner started actively planning his first race.
Bloomberg's three executive assistants—Allison Jaffin, Irene Pistorino, and Karen Greene—came with him to city government from the company and the campaign. All of them now receive both a full-time public and part-time private salary in an unusual arrangement approved by city ethics officials, working for him on personal and corporate matters for up to 30 hours a week.
He converted the public hearing room at City Hall into a bullpen of wide-open offices that mirrored his corporate setting, installing a Bloomberg terminal on his own desk, with access to corporate e-mail, and provided city agencies and his campaign with free access to the company's $1,590-a-month database.
Dan Doctoroff's move from deputy mayor to Bloomberg LP president last year reminded everyone of the seamless bond, if they even needed reminding: "I'm thrilled to remain part of the Bloomberg family," Doctoroff declared.
Bloomberg interviewed Doctoroff for his new job, presumably by moving their chairs together in the bullpen, where they sat only eight feet apart for six years. Ethics officials even allowed Doctoroff to temporarily take some of his key city business with him to his new bullpen at the company's elaborate Lexington Avenue headquarters. With Doctoroff's lateral move, all of the mayor's four most powerful city deputies have also worn Bloomberg LP hats, with the probability of more to come in a third term.
Joyce Purnick, the former Times reporter who has just written the first Bloomberg biography, concluded that "his identification with his company is so strong" that discussing it "animates him like no other" subject, adding that he cites "current facts and figures," though he theoretically left it eight years ago. In 2007, the Times reported that Bloomberg "talked regularly to senior executives at the firm," adding that the scope of the contacts was "at odds with the way the company and Mr. Bloomberg have frequently portrayed his role."
But over the past few years, that close role has repeatedly been illustrated:
*Insisting that he "did not get involved in the day-to-day stuff like personnel," Bloomberg wound up conceding that he'd actually recruited Bloomberg LP's communications director in a 2004 phone call. He talked to executives about the terminal sales, new markets, financial performance, and a gender discrimination suit charging that the company harassed, demoted, or fired more than 80 pregnant women who took leave.
*In 2005, when Bloomberg ran for re-election, Susan Calzone, a six-figure executive at the company with young twins, who had gone to a lawyer about filing a similar suit, ran Women for Bloomberg out of the campaign office for many months, but wasn't paid, at least not by the campaign (her first and only check appeared on the campaign filing after I wrote about her, and after Bloomberg won). Calzone was the first person Bloomberg hired in 2006 when he started his new Bloomberg Family Foundation. Spresa Sukalic, a City Hall staffer who accompanied the mayor to city events until she left to join Bloomberg LP, has been taking unsolicited grant applications for the Foundation at the company headquarters, at least while the Foundation's own offices are being built a block from the mayor's East 79th Street town house.
*Early this year, Judi DeMarco, a close confidante of Republican State Senator Joe Bruno and other GOP senators, was hired by Bloomberg LP just as the mayor was assiduously seeking the GOP ballot line for the 2009 election. (A longtime aide in the state senate, DeMarco was hired by Andrew Cuomo when he became attorney general in 2007 on Bruno's recommendation, and was given the job of lobbying Bruno. After Bruno resigned and was indicted, Cuomo laid DeMarco off.) Though she has a skimpy legal résumé in a recessionary market flooded with lawyers, she almost immediately got a job in Bloomberg's legal department. Just as immediately, she went on jury duty in the Astor case, where she has been for five months. (Stu Loeser, the mayor's press secretary, says Bloomberg had nothing to do with DeMarco's hiring at the company.)
*The Bloomberg campaign hired the son of the current Senate GOP leader, Dean Skelos, at about the same time that Bloomberg LP hired DeMarco, as well as Bruno's former top aide, Mike Avella. Jonathan Capehart, who moved from the 2001 campaign into a lucrative job at the company, later explained the lavish campaign expenditures subsidized by Bloomberg: "Basically, the culture of Bloomberg LP was transferred to the campaign."
*The Global Director of Bloomberg TV, Katherine Oliver, nicknamed "K.O." by Bloomberg, was appointed to head the city's Office of Film, Theatre and Broadcasting, and now oversees NYCTV.
*The construction company that built Bloomberg LP's headquarters, Bovis Lend Lease, became the government's favored builder, securing one hotly pursued job after another until its negligence contributed to firefighter deaths at the Deutsche Bank demolition and it became the target of an ongoing probe investigating its possible over-billing of the city.
*Bloomberg's designer, Jamie Drake, who decorated his homes in Manhattan, Bermuda, and London, also redid Gracie Mansion and the city's new marriage bureau.
*Structure Tone, a contractor that pled guilty to paying bribes, yet was hired by Bloomberg LP to build the office interiors at the headquarters, is now renovating the two buildings at 78th and Madison where the Family Foundation offices are under construction (with mayorally selected Italian marble bathrooms). Structure Tone recently bid on a job to renovate eight floors at the LP headquarters. The company has not sought any city work since its felony conviction. The delayed project is now set for completion, says a worker there, in November, just as Bloomberg plans to win a third term.
*Last year, Bloomberg LP's radio channel, WBBR, started supplying the news on WQXR, the classical music station owned by The New York Times, in what a Times spokeswoman described as a "barter" arrangement that allowed the Times to shut down its own news operation in a cost-cutting move. Bloomberg LP also cut a deal in 2004 to distribute the lifestyle features of WQXR, which the Times recently announced it is selling. In 2005, the mayor declared that four city agencies would use the Times station as a launching pad to announce cultural and other events in shows featuring city commissioners.
The city's rules sanitizing the management of the mayor's plentiful assets, variously estimated at between $16 billion and $20 billion, were approved by the only watchdog explicitly charged under the city charter with inspecting the crossed hairs in this thicket, the Conflict of Interests Board (COIB). Bloomberg appoints all five of its members. The agency described its own weaknesses in a March 2009 report, noting that New York "appears to be the only large municipality in the United States that has granted its ethics board the power to sanction violations, but not the power to investigate such violations." The same internal document points out that the COIB "regulates the very people who set its budget," meaning that "the Board invariably has before it matters involving high-level officials at the same time those officials are passing on the Board's budget, an unseemly situation."
If the board was viewed as toothless before Bloomberg's terms, its advisory opinions, when confronted with the myriad of cases involving this mayor, have raised questions about the health of its gums as well. When Bloomberg took office in 2002, the COIB, consisting of two holdover Rudy Giuliani appointees and a new chair installed by Bloomberg (a fourth member had to recuse himself because he was a lawyer for Bloomberg LP and the fifth seat was vacant), issued a comprehensive 16-page decision about the mayor's potential conflicts. It forced him to release a list of LP's 100 biggest clients, but the list was alphabetical instead of in ranked order, and the board concluded that the mere release of the names made "the risk" that he could use his position to benefit the customers "minimal."
The opinion—negotiated for months with city and Bloomberg LP lawyers—then picked a number out of a hat, saying that a customer would have "to constitute 10 percent or more of Bloomberg LP total sales" to trigger any conflict concerns and force the mayor "to seek further advice" from the COIB. Since this requirement remains in place today when revenues exceed $6 billion, a customer could do more than half a billion dollars' worth of business with Bloomberg LP and still walk into the mayor's office to get a land use or contract approval without tripping an alarm. Discussions with COIB staff turned up no rationales for the 10 percent threshold, and the opinion allows Bloomberg to police this vast and potentially troublesome terrain himself.
In 2002, Bloomberg told the COIB that the largest customer on the list accounted for less than 4 percent of total revenue, but no one knows how much that might have changed since then. (When the board got a fresher list of the top 100, still unranked, in December 2007, it says it mistakenly forgot to post it.) Bloomberg LP customers like Goldman Sachs, Bear Stearns, AIG, Citigroup, Credit Suisse, Deutsche Bank, HSBC Bank, J.P. Morgan Chase, Lehman Brothers, Bank of New York, Tullett & Tokyo, Morgan Stanley, GFI, State Street Bank, and Merrill Lynch have all hired lobbyists to lobby the Bloomberg administration, with several specifying the mayor's office. Of the 124 companies on one or both of the Bloomberg LP lists, 33 appear on the Campaign Finance Board's list of companies doing business with the city.
Citigroup, which was the only other office tenant in the Bloomberg LP headquarters building and is now subleasing its vacated space to Bloomberg LP, even lobbied City Hall—and Doctoroff, in particular—on behalf of the Alternative Investments Group, the very unit located in the Lexington Avenue tower. Goldman Sachs had so many issues before the administration that it took seven pages to list its lobbying activities in the city clerk system (it spent almost a million dollars). When the city and state approved $1.6 billion in low-cost, tax-exempt bonds for Goldman's new downtown headquarters in 2005, Doctoroff justified it by saying that Wall Street's top firm might otherwise leave the city. Last year, the Daily News editorialized that Bloomberg was "taken to the cleaners" in the Goldman deal. The city and state "are in line to forfeit a whopping $321 million to Goldman because the governor and mayor agreed to contract terms that were downright foolhardy." Because of the meager demands of the COIB opinion, no one knows how big a Bloomberg customer Goldman was when it won this largesse.
The botched and deadly demolition at the Deutsche Bank site had been rushed by Doctoroff to clear the way for a new headquarters for another Bloomberg LP client: J.P. Morgan Chase. While the Goldman and Morgan projects are unquestionably projects any city administration would support, their worthiness is irrelevant to the conflict questions, which revolve around the appearance of impropriety at the highest levels of administration, the core question that the COIB routinely deals with aggressively when it fines lower-level city officials.
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.
What she did not disclose was that her agency had already developed a plan involving a mix of affordable co-op conversions and market-rate apartments. Youssouf says now that she "spent a lot of time discussing it with Doctoroff," and is unsure if she ever discussed it with the mayor. She says he asked many "penetrating questions," and that "the price wasn't as high as the sellers wanted." To her knowledge, the proposal was never presented to MetLife.
When the tenants later put together their bid, HDC worked behind the scenes to try to help them shape it. While this "rogue" action, as one participant called it, went on, Housing Commissioner Shaun Donovan met with advocates of the tenants' plan and tried to figure out a way to make it work. Senator Schumer called the mayor and MetLife to push consideration of the tenant bid, according to his press spokesman. Quinn, as loyal an ally as Bloomberg has in city politics, told the Voice she believed that the tenant bid had "real potential and could be done," acknowledging that she raised it with the mayor "briefly" at the end of a private meeting. Thompson, who is now running against Bloomberg, but was then on excellent terms with him, proclaimed that he was willing to invest pension funds in support of the tenant bid, and contacted Doctoroff. The mayor's spokesman, Loeser, regurgitated the same numbers cited by Doctoroff at the time about how much more cost-effective it was to use city subsidies to build new apartments than to safeguard Stuy Town's, a hotly disputed numbers game that does not address why the city offered no help at all and cheered MetLife and Speyer on as paragons of the market.
But Bloomberg had reportedly assured MetLife in a conversation that preceded the announcement of the bid process that he would not interfere with what he regarded as a "private transaction"—a meeting that Loeser acknowledges occurred, but he says "we don't recall" if Stuy Town came up, adding that, if it did, it would only have been "in passing." (He did not deny that Bloomberg made this premature assurance.) The advocates who were then pressing the mayor to act cited many instances when his administration saw a public purpose in helping to shape a deal between private parties. MetLife, alarmed by this public drumbeat, went back to City Hall to check the mayor's temperature, and Doctoroff calmed their jitters.
When Speyer beat the second highest bidder—another real estate giant named the Apollo Group (the tenants came in third)—by less than $100 million, the Times reported that Apollo was "so incensed about losing the bid" that they went ahead with a planned victory party, convinced that Speyer had been given a "last look" at their bid so they could marginally exceed it. Doctoroff simultaneously agreed to only fine MetLife $5 million, rather than the $24 million penalty he could have imposed, for reneging on an unrelated tax abatement deal with the city involving their headquarters building (Loeser says that this dispute was the focus of the earlier meeting between Bloomberg and the company).
Speyer has certainly always been a Bloomberg favorite. Rob Speyer, who spearheaded the Stuy Town negotiations for the family company, was appointed chair of the Mayor's Fund to Advance New York City by Bloomberg. Jerry Speyer, the patriarch at the firm that also owns Rockefeller Center, was the prime mover at the New York City Partnership, the elite business group that adopted Bloomberg as its pet mayor from the outset and would, in 2008, become the sledgehammer for a term-limits extension and another four years for Mike.
The only debate among Bloomberg insiders is whether his hands-off approach was more a favor for Speyer than it was an ideological market preference. With the Speyers dominating the headlines, no one paid attention to the fact that they had a partner in the purchase, or who their banks were. Merrill Lynch was involved at both ends. New York magazine later reported that Merrill was the second biggest financier of the deal, putting up half a billion dollars. In the months leading up to the deal, Merrill also bought a 49.8 percent interest in Speyer's partner at Stuy Town, BlackRock, which matched Speyer and put up $125 million of equity in the deal.
The Merrill/BlackRock merger had been announced with great fanfare back in February 2006, but did not close until shortly before they and Speyer won the MetLife sweepstakes. So, at the very time that Mike Bloomberg was "endorsing" Speyer and stifling options like HDC's and the tenants', the mayor's only corporate partner since the inception of Bloomberg LP, Merrill Lynch, was becoming the top institutional investor in the company that, together with Speyer, would win the bid.
When Merrill began sinking into the mire that forced its collapse two years later, its interests in BlackRock and Bloomberg LP began appearing side-by-side in news story after news story. In a July 2008 search for new capital, Merrill was simultaneously shopping its stakes in both companies. Bloomberg LP wound up buying Merrill's 20 percent on Bloomberg's terms, with Merrill financing all but $110 million of the $4.4 billion purchase price with up to 15-year notes. Since Merrill was getting less than 3 percent of the value of its stake in cash, the business "association" between Bloomberg and Merrill referred to in the COIB decision, as well as the bar on Merrill dealings, continues (Merrill is, of course, now owned by Bank of America).
Conflicts of interest are not about motives. The charter prohibits a public servant from using "his city position for the private advantage of the public servant or of anyone associated with the public servant." It doesn't say that the city official taking the action does so with the intention of benefiting himself or his associate. If the result of the official action is to benefit his business associate—in this case, Merrill—a violation occurs. Presented with a series of written Voice questions about the mayor's knowledge of Merrill's role in Stuy Town and why he didn't see it as a reason for recusal, Loeser took a week and then declined to answer any of them, refusing as well to make available either of the city attorneys who have worked with LP's lawyer on these ethics questions.
As the Voice ran the question of Bloomberg's conflict past the public officials involved in the Stuy Town maneuvers—none of whom ever heard that he recused himself—most were unsure it was the driving force behind the posture he took. Some thought his ties with Speyer were more significant. Some attributed it to his presumed abhorrence of rent regulation, an issue he does everything to avoid discussing. While they conceded it might be some combination of these three, all of them agreed that the mayor's championing of the Speyer/BlackRock/Merrill combine did not end in 2006, when the deal closed.
In fact, when the Stuy Town tenants brought the Roberts v. Tishman Speyer case in January 2007, and when they won that unanimous Appellate Division decision this March, Bloomberg once again took a "neutral" nosedive, refusing to join other city officials on the side of the tenants. Since a city tax subsidy, J-51, is at the heart of the suit, the city's silence is deafening. The complaint alleges that Speyer et al. want to have their cake and eat it, too, seeking to retain millions in tax breaks linked by law to rent regulation, while, at the same time, deregulating thousands of apartments.
Manhattan Borough President Scott Stringer, hardly a Bloomberg critic, filed amicus briefs in support of the 3,000 tenants covered by the Roberts complaint twice already and is planning a third. Quinn joined an overwhelming majority of the Council in filing papers in support of the tenants last month, contending that Speyer and company "would unwork decades of commitment" by the Council and, by extension, the government that implements the laws it passes, "to require that J-51 units be rent-stabilized."
Instead of joining them, Michael Cardozo, the mayor's corporation counsel, issued a statement in March indicating that the city "takes no position on the merits" of the case. Stringer says that the mayor should "absolutely" have joined him in siding with the tenants in court, adding that "anytime someone of that stature" takes a position on an issue like this, "it matters." Quinn says, "We wish that the city had been able to get involved"—both before the sale and in the court case. Garodnick, a Democrat who, like Quinn, is neutral in the mayoral race, says Bloomberg "was wrong in his assessment" of the tenant bid and the sale, and wrong about the ongoing litigation.
It is nothing short of astonishing that, in an election year, Bloomberg can not only sidestep this case, but also refuse to issue a single memo of support for any of the 10 rent reform bills passed by the State Assembly and still awaiting a Senate vote this session. Even Giuliani, when he was running for re-election, pushed the legislature to back rent regulation, and tried to block vacancy decontrol (which allows landlords to exempt certain vacant apartments from rent laws), making Bloomberg the first mayor in modern times to abandon protections that affect a million New York homes.
His refusal to do so is a meshing—conscious or not—of his business and class interests.
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