The cost of doing business with (or near) Carl Kruger

The alleged scheme. (Azi Paybarah, via flickr)
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Some New York businesses have known for a while that it isn't cheap to do business with State Senator Carl Kruger or an associated lobbyist, Richard Lipsky. It's only now that some of them are deciding it's not worth the cost.

In the summer of 1980, when he was a member of Brooklyn's Community Board 18, Kruger was accused of extorting thousands of dollars from local builders in South Brooklyn. He beat that charge. Yesterday, U.S. Attorney Preet Bharara accused Kruger—now a state senator representing parts of Bergen Beach, Mill Basin, Flatlands, Sheepshead Bay, and Midwood—of public corruption on a larger scale.

Prosecutors allege that Kruger received over a million dollars in bribes between November 2006 and last month, and funneled the money through two shell company bank accounts controlled by another defendant, Michael Turano, a gynecologist whose house in Mill Basin Kruger frequently stayed at, providing the basis for a New York Post headline today calling him Kruger's "secret gay lover." (The headline on the New York Times' story was "Graft Charges Depict Kruger's Lavish Lifestyle.")

One of the other defendants in the case is Richard Lipsky, who has been a registered lobbyist since 1981. Lipsky is accused of funneling $252,000, between November of 2007 and June of 2010, to one of the bank accounts controlled by Turano for his family's and Senator Kruger's use. The complaint describes Senator Kruger as "accept[ing] bribes by sharing lobbying fees paid to Richard Lipsky, the defendant, and then taking the very official acts in favor of which Lipsky had been paid to lobby."

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While Lipsky is accused of turning over about $100,000 per year to Kruger, city records indicate that he made only slightly more than $200,000 from lobbying in 2009. While it's likely that Lipsky made more than this (the complaint lists several sources of lobbying income in 2009 that the city's website omits, and Lipsky disclosed over half a million dollars in lobbying income in 2007), it appears that a very large portion of his lobbying income was being kicked back to Kruger in return for favors for his clients, none of whom the complaint charges with wrongdoing.

One of Lipsky's clients is described as a significant real estate development firm, which prosecutors call "Real Estate Firm #1." Another is a major supermarket retailer the complaint refers to as "Supermarket Retailer." Kruger was helpful to Lipsky on a number of different issues for this retailer, including pressing the state to tax cigarettes sold on Native American reservations. This is after February 1st 2006, when the complaint notes that "the Chairman of the Supermarket Retailer stated in the media that 'there is no doubt where consumers are going to purchase their cigarettes.'"

John Catsimatidis, the chairman of the Red Apple Group, made this statement earlier this year. Red Apple has been paying Richard Lipsky $48,000 per year to lobby for the last six years, and before that they paid him more.

"Our lawyers have recommended we sever ties [with Lipsky]," Catsimatidis told me. He did not indicate that Red Apple had already done so.

Catsimatidis rejected the idea that Red Apple had benefited from Lipsky's alleged bribery.

"I don't know anything about that, because we never win with Albany," he said. "I've known Richard Lipsky for over ten years, he's a very smart guy, but we weren't very successful."

Still, Catsimatidis had kind thoughts for his soon-to-be-former lobbyist. "I wish him luck; I hope he didn't do anything stupid."

Catsimatidis feels generally in need of luck: while the state government, with Kruger's support, passed a tax on cigarettes sold to non-Native Americans on reservations, and sent a letter to the federal judge presiding over the ensuing lawsuit, Catsimatidis insisted that "the Indians are still scalping all of us."

The other client of Lipsky's mentioned in the complaint, Real Estate Firm #1, has a vice president for government affairs who is quoted from several conversations on the Kruger wiretap. Kruger's promise to this vice president of an additional $500,000 in state funding for a project is a major element of the prosecution's case. It is abundantly clear that Real Estate Firm #1—which is described as having hired Lipsky since 2005, has a four billion dollar mixed-use project in Brooklyn, and is developing another project in Kruger's own neighborhood of Mill Basin—is Forest City Ratner, the developer of Atlantic Yards.

Joe DePlasco, a spokesman for Forest City Ratner, did not deny that Forest City Ratner is the development company that the complaint mentions but does not name.

"Lipsky's contract was terminated today," he said.

He also tacitly acknowledged that Forest City's executive vice president for government and public affairs, Bruce Bender, is the one the complaint quotes on Kruger's tapped phones.

"It's no surprise that the person in charge of government affairs speaks with elected officials about projects," DePlasco said.

Before joining Forest City Ratner, Bender was the chief of staff for the City Council under Speaker Peter Vallone. A veteran of the Thomas Jefferson Democratic Club, which is extremely influential in Kruger's section of southern Brooklyn, Bender was reportedly consulted last year by Mayor Bloomberg about options for replacing then-deputy mayor for operations Ed Skyler.

In a series of conversations on December 28, 2010, Bender discussed with Kruger the likelihood of receiving funding for three projects: "Lakeside" for $4 million, "Mill Basin" for $2 million, and the "Carlton Street Bridge" for $9 million. Kruger explained that he felt there was only $4 million available from the state. While Bender wanted both "the park" (Lakeside) and the bridge, he eventually decided to finance the park instead of the bridge. After conversation with a senate staff member, Kruger said he was able to commit a further $500,000 (from a pot of money to which he would be losing access two days hence, when the Senate Republicans took control) to the park for a total of $4.5 million.

The prosecutorial complaint alleges that Kruger was "performing official actions in furtherance of [Bender]'s interests by allocating state funds for [Bender's] projects." While Kruger's grant may have been furthering Bender's interests, it went not to Forest City Ratner, but to creating a Lakeside Center for the Prospect Park Alliance, where Bender's wife is a board member.