Thompson’s Keyspan Conflict


William Thompson, the former Board of Education president who is running for comptroller, failed to comply with two rulings issued by the city’s Conflicts of Interest Board (COIB), the Voice has learned.

The rulings involved Thompson’s ties to Keyspan, the Brooklyn-based utility that put him on its board in 1997 and was simultaneously engaged in business dealings with the school system. Keyspan was also Thompson’s largest source of income from 1998 through 2000, and the stock he accumulated as a director became his most significant personal asset. His tax returns indicate that Keyspan paid him $115,285 in those years, and he told the Voice that he got the same amount in stock as part of his compensation as a director. Thompson misstated both the extent of Keyspan’s business with the school system, and his own holdings, in the submissions he made to the COIB.

The April 25, 2000, COIB letter places Thompson’s stock at only slightly above the $32,000 conflict limit specified in the charter, but in fact Thompson had already been given at least $78,285 in stock by the end of 1999, based on a tally of his tax returns. Relying on Thompson’s inaccurate information, the COIB found that his “ownership interest” didn’t “substantially exceed the $32,000 threshold.” Three weeks after the ruling, he filed a Board of Ed (BOE) disclosure form for 1999 valuing the stock at between $60,000 and $100,000. When he filed again for 2000 in May 2001, he valued it at $100,000 to $250,000, making it worth three times what Thompson claimed at the time of the COIB decision.

Both COIB opinions—the first of which was dated December 8, 1997, and authorized him to join the board of Keyspan’s predecessor corporation, Brooklyn Union Gas—ordered him to recuse himself on all company business with the schools. The decisions used almost identical language, drawn from the city charter, in mandating that Thompson “not participate in discussions, attend meetings, or receive copies of relevant documents” involving BOE business with the company.

But Board spokeswoman Victoria Streitfeld told the Voice that her office “is not aware of any memo” Thompson sent to the staff informing them of the COIB decisions, his holdings, or his recusal. She underlined that it was Thompson’s “responsibility”—not the Board’s—”to follow the rules outlined” in the COIB judgment.

Harry Spence, the deputy chancellor who oversaw Keyspan business with the Board from 1997 to March 10, 2000, told the Voice: “I didn’t know Thompson was a director for Keyspan. His business dealings were a complete cipher to me. I never knew about a letter from the COIB regarding a decision on Thompson. So I was not acutely sensitive to things relating to Keyspan. That means it’s not impossible that documents got to Thompson.”

Streitfeld said it was impossible to determine if Thompson received memos or discussed Keyspan business, because he left the Board March 30, 2001. Danica Gallagher, the spokeswoman for the Thompson campaign, did not respond to repeated Voice inquiries as to how Thompson complied with the rulings—including whether or not he notified appropriate BOE officials. Gallagher did suggest that Thompson’s stock “may have accrued in value” in the month between his COIB submission and the decision, a suggestion belied by his tax returns.

Keyspan itself and at least three of its subsidiaries—R.D. Mortman, Fourth Avenue Enterprise Piping, and WDF Inc.—are listed as vendors with the BOE, but such service contracts are not usually put to a Board vote. For example, Keyspan was notified on February 4, 2001, that it had won a BOE contract “valued at $2 million to $3 million over five years,” according to a company spokesman, to service and repair emergency generators. Its $480,000 bid for the first year was far more than the lowest bidder, but that bidder had failed to supply a bond document, so Board staff awarded it to Keyspan.

While Thompson went so far as to inform the COIB of minuscule Keyspan grants to schools, he did not cite any of these service contracts in his letter seeking an advisory opinion. Instead, the only BOE business specified by Thompson was “the provision of gas to BOE facilities,” which the COIB letter found was “pursuant to a contract between the Firm and the Department of Citywide Administrative Services,” the agency that buys all fuel for city government.

Wayne Hawley, the deputy director at the COIB, said that he could not discuss the Thompson decision in particular, but that, generally, discrepancies “in the nature of the outside business” involved in a ruling “could certainly make a difference” in the outcome. Hawley also said that COIB decisions “do not turn on relatively modest differences in stock value,” but “whether this is a relatively modest difference would be for the board to decide.”

In addition to the traditional conflict questions surrounding these contracts, the COIB rulings specifically barred Thompson from any other “involvement in Keyspan’s business with the city—directly or indirectly.” Yet Thompson has been deeply embroiled in the schools issue that has meant the most to Keyspan over these years: the conversion of coal furnaces in hundreds of city schools to gas usage. As Keyspan’s Bob Mahoney explains it, the company had a dual interest in these conversions.

“We’d get the additional gas business. So I’m sure we were bringing it to the attention of the BOE and the School Construction Authority. We saw the schools as a potential for growth. Particularly through our marketing department, we got behind a political movement to take schools off coal and onto natural gas,” Mahoney says.

Then, beginning the same year Thompson joined the Keyspan board, the company “began to buy the companies that did this kind of boiler conversion,” Mahoney added. Just five months before Thompson became a director, Keyspan acquired Mortman, one of the city’s bigger boiler installation companies with a track record of BOE work. In 2000, it acquired the other two, Fourth Avenue and WDF. The three have received $97.4 million in conversion contracts since Keyspan acquired them.

The School Construction Authority—not the Board—actually awards the boiler work; but the Board made the conversions a priority and approved the financing of them in the five-year capital plan and their annual budget submissions to the city. Thompson repeatedly supported these capital allocations, including those in the plan he voted for in 1999—a public good, no doubt, but one among many public goods the Board had to weigh in a limited capital budget. It is the nature of a conflict that no one can determine whether Keyspan’s interests affected Thompson’s capital priorities, but in one prior case, the COIB levied a significant fine for conduct that it said may have “reasonably caused the public to question” an official’s “undivided loyalty to the City.”

By the beginning of 1998, shortly after Thompson signed up with Keyspan, the Board issued a request for proposals (RFP) to put the design of the boiler conversion process in the hands of a single company. Keyspan bid. But state legislative leaders would not support funding the project and the Board had to withdraw the RFP. Pat Zedalis, the BOE’s director of school facilities, recalled through a spokeswoman having talked with Thompson about the RFP and his informing her of his role as a Keyspan director. He withdrew from the discussion.

Zedalis’s story cuts both ways for Thompson. It shows that when confronted with a concrete contractual discussion right after the first COIB ruling, he did the right thing. But it also shows that he was on notice that the company that would assume so large a place in his personal life had a great stake in a public policy issue—boiler conversions—that would appear on his desk in a variety of forms. Strange indeed that he forgot to mention it, even when he went back to the COIB two and a half years later.

Research assistance: Gregory Bensinger, Anna Levine-Gronningsater, Lisa Schneider, Douglas Gillison, Shonna Carter