Richard Ravitch: Ties That Bind?

The Village Voice once called Richard Ravitch “the city’s most honorable builder.” That quote wound up cited in The New Yorker and even in the court records of the Penn Central bankruptcy case (by brokers ­representing Ravitch who were trying to im­press a judge then considering a Ravitch bid). Considering the competition, it wasn’t much of a compliment even then. But his recent record makes it impossible to repeat it. For one thing, Ravitch recently sold his third-generation family firm, HRH Construction Co., so he’s no longer a builder. More important, the Commodore story led me into a series of possible conflicts concerning his role as the unpaid chairman of the state’s Urban Development Corporation:

When Ravitch took over UDC, he brought in his company’s law firm with him — Barrett, Smith, Schapiro and Simon. Since 1975 UDC has paid the firm $1.5 million in fees. They remained counsel to HRH and Manhattan Plaza, Ravitch’s most important housing project, throughout Ravitch’s two-year at UDC. Ravitch told me he saw “no conflict.” This dual role placed a difficult ­burden upon the lawyers in determining what portions of their conversations with Ravitch were to be billed to UDC and what portions to Ravitch’s own company, HRH.

Two weeks after Ravitch resigned from UDC, he sold HRH to Starrett Housing Co. Starrett would become UDC’s principal builder, with almost $150 million worth of contracts on UDC jobs. Indeed, after the sale by Ravitch, as a Starrett subsidiary, received the contract to build the Commodore, the largest UDC project approved while Ravitch headed the agency. As part of his agreement with Starrett, Ravitch divested himself of any interest in HRH projects like the Commodore (though he set up his own office at Starrett and began working jointly with them on a number of unrelated projects). Ravitch’s longtime partner, Irving Fisher, still president of HRH, is building the Commodore ­and has become both a major shareholder and chief officer of Starrett’s domestic construction activities. The rest of the HRH staff has gone with Fisher.

A week before Ravitch voted to approve UDC’s role in the Commodore in 1976, he wrote the state Board of Public Disclosure: “No part of HRH Construction Corporation’s business has any involvement in any project or activity currently subject to UDC jurisdiction and I do not anticipate that there will be any future dealing with matters subject to UDS jurisdiction [itals added].” A few months after this letter, Ravitch began negotiations with Starrett to sell HRH and Donald Trump began negotiations with Starett to build the Commodore. These negotiations proceeded simultaneously through late 1976 and early 1977, and when they concluded, Starrett owned HRH and Trump was com­mitted to use HRH as his Commodore build­er.

Trump and Ravitch — who are not friend­ly — say they did not talk to each other about their simultaneous bargaining with Starrett. Starrett isn’t answering any questions about what either said to them. Though Trump ne­gotiated with Starrett — not HRH — his con­tract ultimately was made with HRH and he didn’t switch to Starrett until the Starrett/HRH negotiations had begun.

This complicated intertwine may have also affected UDC policy. There were dozens of decisions affecting the Commodore being made at UDC while both the Ravitch and Trump negotiations with Starrett proceeded. Trump and Starrett are partners in major ventures and Trump is the largest equity investor in Starrett City (Ravitch says he was unaware of this relationship). Were Ravitch’s UDC to create problems for Trump’s Com­modore, it might have affected Ravitch’s ne­gotiations with Trump’s friends and business partners at Starrett. Were Starrett assured of a major institutional job like the Com­modore, it might have increased the firm’s interest in acquiring HRH.

In addition to the Commodore, UDC was at various stages of negotiations on four other projects where Starrett eventually acted as developer or builder. The discussions be­tween UDC and Starrett regarding all of these projects were going on while Ravitch was still at UDC and negotiating with Star­rett himself.

Several months after UDC designated Starrett on these projects, the agency re­quested an after-the-fact opinion from the state Board of Public Disclosure on the pro­priety of these relationships. The ethics guidelines for UDC staff during Ravitch’s reign stressed the need to avoid “not only real compromises of integrity but also the ap­pearance of such conflicts or compromises” and barred direct or indirect financial interest that have “or might soon have a substantial business relationship with UDC.” But the board’s staff secretary managed a decision dated one day after the request and — in one paragraph — found no conflict. There are no public filings about the HRH/Starrett mer­ger; so there is no way to penetrate these ne­gotiations. But the appearance is there: can anyone be sure that Ravitch’s influence over UDC projects was not what Starrett thought it was acquiring when it was negotiating to take over HRH? ❖