Loyal to a Vault
Main street in downtown Bay Shore, with its vacant storefronts, crumbling buildings, tiny bodegas, and nearby weed-filled lots, looks as if it could use some help. But looks are deceiving: the street is paved with gold for the Long Island village's most prominent politician, U.S. Senate candidate Rick Lazio.
Right down the block from his Long Island campaign headquarters is a branch of European American Bank, one of New York's biggest banks and an arm of the giant Dutch bank ABN AMRO, and its executives and workers will do anything to help their local hero. It's a wonderful life for Lazio, but if you're thinking that the fresh-faced congressman is a character in a Frank Capra movie, picture him as one of greedy old Mr. Potter's flunkies.
Already one of the nation's top fundraising members of Congress, Lazio hauls in more than just campaign contributions from EAB execs. He earned more than $120,000 for his campaign chest in "other receipts" last year from accounts at his local EAB branch. This year, according to campaign records filled out by his treasurer, Anthony J. Piccirillo, whose office is across the street from the bank, Lazio's on course to rack up $200,000, unless his race against Hillary Clinton interferes. The records don't say exactly what the payments from EAB are forthey're in the "other receipts" category for interest and dividendsbut a campaign spokes-man says the money likely is from certificates of deposit invested by Lazio from campaign funds he hasn't had to use in "dormant" years. Like his mentor Al D'Amato, Lazio uses those off-election years to rake in money from bankers, mortgage companies, and the like.
Lazio has been one of the most favored politicians of the housing-finance industry, and he has returned the favor by pressing for looser regulations and lower fees for his business friends, not to mention subsidies and federal guarantees for their ventures. In 1997, he argued that banks needed to expand into new moneymaking arenas by saying, "Without the ability to evolve, banks will be condemned to stagnation and death."
But what will they evolve into? Looser regulations could be hazardous when it comes to a place like EAB, which has taken Americans on a roller-coaster ride in the past 50 years. Originally Franklin Square National Bank, it was the first bank in the country to offer credit cards to the massesand, to Lazio's good fortune, the first bank to offer certificates of deposit. After its ingenious president, Arthur Roth, was forced out because of a personal real estate scandal, another schnook took it over. And then the biggest schnook of all, shadowy Italian financier Michele Sindona, took control in 1972 and drove it to ruin, creating in 1974 what was the biggest bank failure in U.S. history. Sindona looted his Milan banks to buy Franklin and then drained money from Franklin. He was convicted of numerous charges and killed himself in prison. And some of Franklin's American officials wound up in prison, too.
The roller coaster has been heading up since then. A group of European banks bought Franklin from U.S. taxpayers, and in 1991 ABN AMRO became the sole owner.
With high real estate prices and a booming stock market, EAB is thriving. Given its history, it's a special place, and Rick Lazio has a special relationship with EAB. Ed Travaglianti, the bank's chairman and CEO at its Uniondale, Long Island, headquarters, has been a steady contributor to only one congressmanLaziosince 1994.
The bank's big cigars must have gathered around the watercooler one morning in 1998, without telling their Dutch masters, to chat about what a great guy Lazio was. On July 30 of that year, each of EAB's top 10 executives gave $250 to Lazio's campaign coffers. For five of them, it was their only campaign contribution to anyone during the 1990s, according to records. (Travaglianti didn't return Voice calls requesting an explanation.) Like a snake swallowing its own tail, Lazio, in effect, takes money from EAB and then invests it back in EAB, and thus makes even more money for his campaigns.
As head of the House Banking Committee's subcommittee on housing, he's crucial to housing financiers. In September 1998, Lazio ranked fifth among all members of Congress in contributions from the housing-finance industry, according to National Mortgage News, raking in $177,170. (D'Amato, trying in vain to hold onto his Senate seat, was second, collecting $214,382.)
During the 1997-98 election cycle, Lazio took in $633,993 from the finance, insurance, and real estate industries, more than half of it from PACs. He earned it by courting them. His campaign records show that he spent $3500 in May 1997 on a "June event" with the Bankers Club of Puerto Rico; reimbursed his brother-in-law (and adviser) Mike Moriarty $310.27 on January 17 "for bankers' event"; and held fundraisers in Florida, Washington, D.C., and New York City.
He was so successful in that nonelection year that, by December 31, his campaign had $1.3 million in cash on hand. And despite the expense of entertaining bankers, he still had enough money to invest in CDs at EAB, from which he earned $43,892.96.
Since winning his House seat in 1992 after accusing incumbent Tom Downey of "greed" for writing bad checks in the House internal-bank scandal, Lazio has had only token opposition. By the end of 1998, he had $1.9 million in cash. He earned $78,654.45 in interest and dividends that year, nearly all of it from EAB.
During 1999, he raked in nearly $1.8 million in contributions. By December 31, his war chest contained nearly $3.4 million, $120,000 earned that year from his EAB accounts.
Last week, Lazio's crew prepared to move his headquarters to Manhattan to really do battle with Hillary. He's still taking care of bankers' business in D.C., however. One of his current bills, H.R. 2441, would lower the transaction fees paid by mortgage companies and borrowers that support the operations of the Securities and Exchange Commission. The booming economy has produced millions of surplus dollars in such fees. Lazio's pals want to pay less to support the agency that regulates them.
No politician has suggested viewing that money as a "peace dividend" to spend on construction of affordable housinglike the still unfinished South Wind Village project of affordable houses and town houses on the north side of dilapidated downtown Bay Shore.
Naturally, EAB is participating in this federally backed venture, along with a host of other companies. This desperately needed project will cost $12.4 million. If it's completed, its new mortgages will mean new fees to lenders like EAB. But private lenders are putting in only $4.9 million. The rest is corporate welfare, courtesy of taxpayers.
Another thing Lazio is leaving behind is a brand-new, $20 million minor-league baseball stadium in Central Islip, just north of Bay Shore, that's entirely funded by public funds. Team owner Frank Boulton, a Lazio contributor and fellow resident of Brightwaters, the ritzy suburb next to Bay Shore, will of course get to keep much of the income generated by the new stadium, which, incidentally, has been named EAB Park.
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