The Real Deal New York

Sheldon’s grey cloud and silver lining

Former State Assembly speaker Sheldon Silver has successfully appealed his corruption conviction — and that’s a double-edged sword for New York real estate
By Will Parker | August 01, 2017 11:00AM

Sheldon Silver (credit: Getty Images)

The recent overturning of Sheldon Silver’s 2015 corruption conviction raises key questions for both the real estate industry and those who police it: Do landlords and developers have clearer guidelines on what counts as corruption, or will heightened scrutiny and a likely retrial only bring more of them into the witness box?

Although the former State Assembly speaker was sentenced to 12 years in prison for schemes involving real estate developers, he was spared last month by a Supreme Court decision that cleared former Virginia Governor Bob McDonnell of corruption charges in 2016 — a ruling that redefined what could be considered an official act by a politician.

The appeals court judges who overturned Silver’s conviction did not label any of the evidence presented in his case erroneous. They did rule, however, that had the jury been properly instructed on what now defines such official acts, it may not have decided that Silver was guilty.

For New York real estate players, who rank among the most active lobbyists in New York State politics, it’s welcome news that certain pleasantries exchanged with key politicians may not get construed as corruption in court.

“Real estate is to New York what oil is to Saudi Arabia,” said Kenneth Fisher, a real estate and government relations attorney with clients that include SL Green Realty and Pinnacle Group. “I don’t think it’s any surprise to the average voter that a major industry like this tries to influence government in support of its interests.”

In December 2011, Silver released a statement opposing the relocation of a methadone clinic to 90 Maiden Lane in his lower Manhattan electoral district. The proposed facility for recovering drug addicts was unpopular with many of the New York Democrat’s constituents. It was also unattractive to the developer Glenwood Management, which owned a nearby luxury rental building that happened to have been financed with state bonds approved by one of Silver’s proxies.

A month after the politician publicly opposed the clinic, something unusual happened. He and Glenwood executive Charlie Dorego signed a business agreement with the small New York-based real estate law firm Goldberg & Iryami. The agreement said that Glenwood would hire the firm for property tax work and that Silver would then share in the profit made from what Glenwood paid.

That contract was a key piece of evidence in the corruption trial, in which federal prosecutors accused Silver of orchestrating a kickback scheme with Goldberg & Iryami, Glenwood and developer Steve Witkoff. Silver was eventually convicted on charges that he had obtained nearly $4 million in illicit payments in return for “official actions” that included direct handouts and votes on rent and real estate tax laws that would prove beneficial to Glenwood and Witkoff, among others.

Another kickback scheme involved patient referrals and state grants that Silver gave to the mesothelioma practice of Dr. Robert Taub. One specific incident involving Dr. Taub that prosecutors cited — a public ceremony honoring him that was prepared by Silver’s staff — is an example of an act that may not suffice as “official” in the post-McDonnell world, Fisher noted.

Despite the successful appeal, acting U.S. Attorney Joon Kim quickly announced his intention to retry Silver. John Kaehny, director of good-government group Reinvent Albany, said he believes the overturning is a momentary hiccup. “The court said the facts were sufficient and effectively invited a retrial,” Kaehny said.

Dan Weiner, senior counsel at the Brennan Center for Justice’s Democracy Program at New York University, said that many of the allegations against Silver will still constitute official acts if the case again goes to trial. “I think there’s actually a good argument that everything he did would fall under the rubric of an official act. But that’s going to have to be something the courts and the government work out.”

Though many have long charged that the real estate industry holds excessive sway over New York politics, the Silver trial gave people the opportunity to see how it works up close, Fisher said. “It reminded people of that [influence] and opened the curtain up so they could see some of the mechanics of how the industry and public officials interact with each other,” he explained.

But for real estate moguls, the stakes are simply too great to keep even symbolic distance from the New York politicians who set the rules on everything from rent laws to property taxes.

Janos Marton, former special counsel to the Moreland Commission to Investigate Public Corruption — the body created and dissolved by Gov. Andrew Cuomo — said relationships forged between business interests and politicians are often strained when one side doesn’t get what it wants.

“From what we saw at the commission, industries that are heavily involved in the financing of politicians’ careers and campaigns will find themselves in a situation where they are nervous,” Marton said. “If they cut off the spigot or if they don’t respond to a request it can work to their detriment, as much as the lubricant of money works to their favor when they are providing it.”