The Real Deal New York

Probe into developers’ tax breaks at luxury projects in limbo

With Moreland commission disbanded, U.S. Attorney’s office may take harder line on top developers

May 01, 2014
By Hiten Samtani

From left: 113 Nassau Street, Joe Sitt and Arnold Fisher

From left: 113 Nassau Street, Joe Sitt and Arnold Fisher

Just nine months after creating the Commission to Investigate Public Corruption, which was probing controversial tax abatements given to five of the city’s top real estate developers, Gov. Andrew Cuomo disbanded it last month, leaving questions about the future of the inquiry.

Commonly known as the Moreland Commission, the panel was looking into whether the five developers — Silverstein Properties, Thor Equities, Extell Development, Fisher Brothers and Friedman Management — received 421-a tax abatements on high-profile luxury projects because of their political contributions.

With the panel dissolved, the investigation is now in limbo. “The Moreland Commission had clearly identified smoke vis-à-vis REBNY campaign contributions and 421-a abatements,” said Jesse Laymon, executive director of good-government group EffectiveNY. “But they were shut down before they could identify the existing fire.”

Any future for the probe now appears to lie with Preet Bharara, the United States attorney in Manhattan and a respected crusader against corruption. Two weeks after Cuomo shut down the commission, Bharara sharply criticized the governor’s decision and moved to take possession of the investigation’s case files.

“Will the U.S. Attorney, who unlike Cuomo isn’t beholden to state officials, pick up where Moreland left off?” Laymon asked.

A spokesperson for the Bharara’s office declined to comment. Representatives for the developers did not respond to requests for comment.

The Moreland Commission was tasked with investigating questionable political donations from the developers. For example, associates of Gary Barnett’s Extell donated $100,000 to Cuomo’s re-election campaign on Jan. 28, 2013, the same day that a bill passed allowing the tax breaks, which are typically reserved for affordable housing projects but were somehow applied to Extell’s ultra-glitzy One57. Three weeks later, Extell donated a similar sum to a state Democratic Party account that paid for some of Cuomo’s advertisements.

Fisher Brothers was being investigated for an abatement it received at 86 Trinity Place, while Friedman was under scrutiny for its building at 113 Nassau Street. The Silverstein probe involved its Four Seasons tower project at 30 Park Place and Thor its 516 Fifth Avenue project.

“The idea that a super-luxury building has a tax abatement is beyond me,” said one real estate insider. “It’s a complete misallocation of resources.”

The commission subpoenaed extensive information from the developers in August, including communications with lobbyists and elected officials. It followed with a December report in which it stated that it was clear that “the combination of very large campaign contributions and very narrowly targeted benefits to those same [real estate] donors creates an appearance of impropriety that undermines public trust in our elected representatives.”

The report stressed, however, that the investigation was ongoing, and didn’t draw any conclusions on whether the 421-a abatements the developers received involved any “improper action.”

Susan Lerner, the executive director of advocacy group Common Cause New York, said it was “hard to imagine” a better place for the investigation to land.

“If I were one of the real estate firms that had been the subject of the subpoena, I don’t think I’d breathe a sigh of relief,” she said, “because an even stronger investigative body has picked up the file.”