City comptroller and Democratic mayoral candidate Bill Thompson and his wife Elsie McCabe received three loans totaling $1.4 million from Amalgamated Bank, which calls itself “the labor bank” and does a multi-billion dollar business with his office, the Voice has learned.
McCabe is also the president of an art museum that is building a new headquarters on 109th Street and 5th Avenue, and that Thompson has called public officials to support. At the same time that the couple got two of their Amalgamated mortgages in the summer of 2008, the developers building McCabe’s museum and a companion luxury condo project obtained $161 million in construction financing from the United Labor Life Insurance Company (ULLICO), which is based in Washington, D.C. and describes itself as “the only multi-line financial services company owned by labor.” Wachovia is participating in the ULLICO loan and providing approximately $19 million in permanent financing specifically for the museum once it is built. Wachovia has acted as a major underwriter of city bonds, selected by the comptroller and the city’s budget director (Thompson has also joined other pension funds in a lawsuit against the bank).
Thompson did not answer e-mailed questions about how the combination of the personal and museum mortgages might affect his independence from labor as comptroller or, if elected, as mayor. At the time all the loans were awarded, Thompson was widely perceived as a favorite in the 2009 mayoral election, with Michael Bloomberg still supporting the retention of term limits. Amalgamated was then owned by Unite/HERE, the 500,000-member merger of garment and hotel workers (they have since split).
ULLICO’s board is entirely comprised of labor leaders from across the country, including New York. Its current CEO, Ed McElroy, who took over in 2009, was the president of the American Federation of Teachers (AFT) and an influential member of ULLICO’s board in 2008. New York’s Randi Weingarten recently replaced McElroy at the AFT. Both Weingarten and McElroy denied any knowledge of the museum loan, and another ULLICO official attributed it to a relationship with the condo builder, Brickman Associates, though he said ULLICO had never done business with Brickman before this deal. A Thompson aide, Gayle Horwitz, says that Thompson “had no role in the ULLICO, or any other financing for the museum,” though one former top public official tells the Voice that Thompson personally called him and successfully pressed for millions in assistance for the project.
Thompson also declined to respond to inquiries about the Democratic district leader who, acting as a court-appointed receiver, sold him the Harlem home that Amalgamated financed. The $2.1 million price — which was agreed to in May 2008, months before the meltdown in housing prices — was $340,000 below the listed price and $100,000 less than the price listed in court records four years earlier. The receiver, Marc Landis, conceded that Thompson’s offer was “the only one” he considered, though he insisted he did not discuss it with Thompson until the August closing.
When Thompson and McCabe bought the four-story brownstone at 106 West 121st Street a couple of weeks before their September 2008 wedding, Amalgamated provided a $729,000 mortgage and a $400,000 home equity credit line. The Voice has obtained records indicating that the interest rate on the mortgage was 6.05 percent, while Thompson provided a heavily redacted monthly statement for this October indicating that it was 7.1 percent. He declined to indicate what his monthly payment has been since the granting of the loan to reconcile these differences. The New York Times reported that rates on the type of “jumbo-light” mortgage obtained by Thompson were “hovering around 7 percent” at the time; even conventional conforming mortgages, granted on homes below $417,000, were going for 6.52 percent on average.
But even Thompson’s claimed rate is a bargain because of Amalgamated’s decision to split the mortgage and the credit line into two separate transactions. It was split as an apparent end-run around a $729,750 ceiling set by Congress a couple of months earlier for these “conforming jumbo” mortgages. If a mortgage exceeded that amount — which Thompson hit on the nose — he would have had to pay what the Times said were “true jumbo” rates of 7.29 percent and above. That’s what a single mortgage for the combined $1.2 million would have cost Thompson. The mortgage is still listed in city records as a GMAC mortgage, but a spokeswoman for the company, which serviced mortgages for Amalgamated at the time, says that Amalgamated “provided the money to buy the loan” and that GMAC “sold it shortly after to Amalgamated.”
Amalgamated officials acknowledge that it was their loan, but would not answer questions about whether it was listed as a GMAC loan to avoid questions about whether the bank had split the loan to evade the federal ceiling and give Thompson the best deal possible. GMAC’s Jeannine Bruin explained that when a company like GMAC services a loan, “its name is on the paperwork, and often people mistake the servicer for the mortgage holder.” Horwitz said “Amalgamated suggested that the loan be split.” She also contended that “in anticipation of public scrutiny regarding these transactions,” Thompson obtained letters from GMAC and Amalgamated confirming that “the rates they received were the normal going rates.”
In September 2007, Amalgamated gave McCabe a 20-year, $200,000 loan at a rate of 4.80 percent, putting a junior lien on her 97th Street apartment. The New York Post reported a year earlier that McCabe and Thompson were dating, and Thompson has subsequently indicated that they dated for two years prior to the marriage. Horwitz said Thompson “had nothing to do” with the 2007 apartment loan. McCabe used the proceeds of her $2.5 million sale of the apartment to pay off the Amalgamated loan when she sold it to finance the purchase of the house. The Amalgamated $729,000 mortgage in 2008 appears to be Thompson’s contribution to the home purchase, since McCabe cleared $1.4 million from her apartment sale after her mortgages were paid off, roughly the remainder needed to buy the elegantly renovated house.
Records indicate that Thompson has repeatedly been delinquent in his payments on the Amalgamated mortgage even as he has run for mayor, falling as much as three months and $11,500 behind. He has not tapped the $400,000 credit line. “While they are current to date,” said Horwitz, referring to Thompson and McCabe, “they have had an occasional late payment like everyone else.”
Since Thompson became comptroller and became manager of the city’s pension funds in 2002, Amalgamated has grown from a minor to a major manager of city assets. Selected in 2000 as one of the New York City Employees Retirement System‘s domestic equity managers after a bid solicitation, Amalgamated’s share of NYCERS assets grew from $174 million in fiscal year 2002 to nearly $3.6 billion in 2008. In fact, at the very time the personal loans were made to Thompson, Amalgamated took a quantum leap in asset management, climbing from $1.5 billion to $3.6 billion. Only Barclay’s and Blackrock managed more NYCERS funds. Horwitz says that in March 2009, NYCERS cut Amalgamated to $2.6 billion, when the fund’s holdings dipped. Though Amalgamated is a “passive” manager that does not make private equity investments, its fees jumped from $6 million to $51 million in 2008.
Thompson has been minimizing his role in the management of NYCERS and other funds during the campaign, contrary to his public statements and press releases for years. He is correct that NYCERS’ trustees voted on the asset allocation for Amalgamated in 2004 and 2008, but the comptroller’s finance staff typically makes recommendations regarding these allocations and boards have routinely over the decades rubberstamped these choices.
In addition to the bank’s pension role, Thompson and the city’s finance department jointly decided to deposit $50 million in city funds in five new Amalgamated branches as part of the city and state’s Banking Development District (BDD) program, which offers below-market interest rates and other incentives to banks that locate in underserved neighborhoods. As a member of the city’s Banking Commission, Thompson approved each of these 2007 to 2009 deals, frequently attending the ribbon-cutting when the branches opened and declaring at an Amalgamated opening in Long Island City: “I am proud to have taken a leadership role in participating in the state’s BDD Program.”
Thompson and the finance department decided to make the maximum deposit permissible under law — $10 million — in the Amalgamated branches, each of which was matched by similar deposits of state funds. Amalgamated also received a property tax exemption associated with the program at one of their branches. While state banking officials initially approve a BDD application, Thompson and finance also vote on it as commission members, oversee the collateral requirements, renew it annually, and grant tax exemptions and other benefits to BDD branches. Thompson and bank president Derrick Cephas appeared together at the opening of the Sunset Park branch in September 2008, a month after the mortgages for Thompson’s new home closed.
While Amalgamated is the top recipient in the state of BDD deposits, the second highest, North Fork (Capital One), is also a major lender to Thompson. North Fork received $30 million in deposits at three branches. Thompson has reported obtaining two personal loans and a four-year revolving line of credit from North Fork from 2003 to 2008. His disclosure forms filed with the city value the top loan at between $35,000 and $59,999, and credit line as between $5,000 and $34,999. Since 2001, seven North Fork executives, including ex-CEO John Kanas, have contributed $23,750 to Thompson’s campaign committees. The bank contributed the maximum, $4,500, to his 2005 transition committee, and Thompson’s campaign maintains its account with North Fork (Capital One).
Amalgamated’s Cephas, who also was one of six African Americans to receive Thompson’s Heritage award at a gala event in 2008, says that there was “no connection between the business the bank did with Thompson’s office and the loans,” adding that he “had no knowledge about these mortgages.” He refused to discuss his personal relationship with Thompson, the bank’s pension fund business or the terms of the mortgages, even if Thompson authorized disclosure. He says he “sees Thompson around town.”
Cephas attempted to minimize Thompson’s role in the BDD program, accurately pointing out that the initial approvals are done at the state level. But Thompson’s campaign website, claims that Thompson “spearheaded an initiative allowing city funds to be deposited” in these banks and specifically lists two of the Amalgamated branches and one North Fork branch. Cephas said BDD “was a good program for the bank,” but insisted “we don’t make a killing.”
The house Thompson bought was listed in “mint” condition with six bedrooms, seven tiled fireplaces, three-and-a-half baths, two kitchens, four dressing areas with marble topped washstands, three skylights, two floors of bay windows and a garden apartment. It was so extensively restored — from its eight-month-old roof to its repainted façade and interior — that Thompson has not done any renovations (nor are any tenants listed as living there).
It was listed on April 16, 2008 for $2,490,000 by a broker, Norman Horowitz of Halstead, who was selected by the receiver Landis. Court records reveal that Landis had a telephone conference with Horowitz “re sales strategy, house showing” on April 28 and that on May 13, he and Horowitz “reviewed” the Thompson offer, the only offer referred to in the 26-page bill Landis filed with the court. Though the house had been listed for less than a month and though the renovation work was still not complete, Landis accepted the offer. By June 6, he was reviewing a sales contract with Thompson’s lawyer that had already been prepared, and they went to contract in early July.
A new judge, Deborah Kaplan, took over the divorce case that led to the court-supervised house sale within a few days of the signing of Thompson’s contract. Dubbed “Judge Booty” by the New York Post, Kaplan is the daughter of a convicted drug trafficker who arranged mob hits. A Lucchese crime family underboss, Anthony “Gaspipe” Casso paid for her $150,000 wedding and attended it, and covered $80,000 in rent on her apartment. Kaplan is a civil court judge whose term is up in 2011, when she will either seek re-election or elevation to Supreme Court. Landis is one of the most influential district leaders in Manhattan, recently elevated to the second highest position in the party organization, chairman of the county committee. Kaplan immediately approved the sale and her press spokesman tells the Voice that she did so because neither party objected.
In fact, one of the owners, Franklyn Castro, went to the appellate division immediately to try to stop the sale. Castro, a plumber who says he spent five years and “put his heart and soul” into the restoration of house (“the only thing I didn’t do myself was the roof and the electrical”), argued that the divorce settlement had given him the right of first refusal, and that he should be permitted to match any offer. Judge Laura Visitacion-Lewis, who handled the case before Kaplan, had stripped Castro of that right over the course of the contentious four years that had elapsed since the divorce was settled, blaming him for the failure to get the house ready for sale. That’s why Landis was named a receiver in late 2006, to complete improvements on the house that would make it marketable. Castro still rails about how the house was stolen from him.
The 2004 divorce settlement required an asking price of at least $2.2 million and the attorney for Castro’s wife noted repeatedly in January 2007 that it could go for $2.8 million. In fact, Landis took out a $250,000 bank loan to make additional improvements in 2007, yet the sales price sunk.
Thompson has partied at the annual dinner for Landis’ club, the Community Free Democrats, and joined the club in a 2007 fight against a new OTB parlor on West 72nd Street, voting against it as a member of the OTB Site Selection Board and appearing at a rally with Landis against it. Landis contributed $250 to Thompson in 2001 when Thompson was running in a Democratic primary for comptroller, and $88 this October. Thompson said through Horwitz that he “knows who Landis is,” but that he has “no personal relationship with him.” Horwitz maintains that “sales prices had already softened considerably by the summer of 2008,” though this price was set in early May. McCabe’s apartment, which was on the market for 44 weeks, only dropped in price by 10 percent, while the house dropped by nearly 14 percent in three weeks.
Ironically, Landis’s top client, Tahl-Propp, has paid more than $150 million to take title to over 3,000 Harlem apartments in recent years, and has so angered residents that a coalition called Harlem Tenants Against Tahl-Propp has been organized, including people from many of its buildings. A City Limits article identified the company as engaging in “predatory equity” practices, overpaying so much for properties that they put tenants at risk. Horowitz, the broker Landis selected for the sale of the Thompson house, also represents Tahl-Propp. When Landis ran unsuccessfully for assembly in 2006 and considered running for city council more recently, Tahl-Propp was his biggest donor by far.
Research assistance: Steve P. Ercolani, Aaron Howell, L.C.E Jordan, Kate Rose, Amanda Sakuma, Grace Smith
This article from the Village Voice Archive was posted on October 28, 2009