Wall Street Journal Bill de Blasio’s Administration Failed to Protect Public Interest on Rivington Deal, Report Finds by Corinnne Ramey

Wall Street Journal
Wall Street Journal
Bill de Blasio’s Administration Failed to Protect Public Interest on Rivington Deal, Report Finds
Corinnne Ramey
Josh Dawsey and Rebecca Davis O'Brien

Mayor’s office acknowledges problems and promises not to repeat ‘mistake’A report from the New York City Department of Investigation outlined serious flaws in the city’s decision to lift deed restrictions at Rivington House on the Lower East Side.A report from the New York City Department of Investigation outlined serious flaws in the city’s decision to lift deed restrictions at Rivington House on the Lower East Side. PHOTO: AGATON STROM FOR THE WALL STREET JOURNAL

Significant communication failures and “a complete lack of accountability” within New York City Mayor Bill de Blasio’s administration led to the removal of deed restrictions from a Manhattan nursing home, according to a report released Thursday by the city’s investigation agency.

The Department of Investigation report found many top officials in the administration were aware of the efforts to lift the restrictions at Rivington House, at 45 Rivington St. on the Lower East Side, and failed to stop it. The restrictions limited the building’s use to a not-for-profit residential medical-care facility.

The Allure Group, the building’s former owner, paid the city $16.15 million to lift the restrictions last year and then sold the property this year for $116 million to developers who plan to build luxury apartments, making what appears to be a $72 million profit.

City officials have repeatedly alleged that Allure misled them about its intention to sell the property and turn it into housing, but the report found that Allure told city officials about its plans. The deed change prompted multiple probes, and Thursday’s report marks the first findings from investigators.

“Prior to the lifting of the deed restriction on Rivington, the city had the opportunity to protect its interest and failed to do so,” the report found.

RIVINGTON TIMELINE

  • 1992: VillageCare purchases 45 Rivington St. in Manhattan for $1.55 million from the city, with a two-part deed restriction requiring the property be run by a non-profit as a residential medical facility. The facility served patients with HIV/AIDS.
  • 2013 - Feb. 2014: Lobbyist James Capalino, hired by VillageCare, asks the Department of Citywide Administrative Services to lift the restrictions so the property can be sold at the highest price.
  • July 2014: City officials, including members of the mayor’s office, decide not to lift the restrictions.
  • Aug. 3, 2014: First Deputy MayorAnthony Shorris forwards email to Mayor Bill de Blasio with “after-meeting report,” which includes discussion of Rivington House.
  • September 2014: City Hall asks DCAS about lifting deed restrictions on Rivington House; DCAS begins the process.
  • Nov. 17, 2014: Allure Group executive Joel Landau asks DCAS to remove restrictions, saying he will run the facility as a for-profit nursing home.
  • Jan. 2, 2015: DCAS Assistant Commissioner Randal Fong prepares memo advocating lifting the deed restrictions, using language directly from a memo Mr. Capalino wrote to DCAS.
  • Feb. 9, 2015: VillageCare sells Rivington to Allure for $28 million, with deed restrictions in place.
  • March 2015: Allure tells DCAS that it might convert the property to condominiums, a statement that was included in a DCAS report but removed from the final version by Mr. Fong.
  • July 8, 2015: DCAS memo to Mr. Shorris said agency “is proceeding to remove” both restrictions for $16.15 million.
  • November 2015: Deed restrictions lifted.
  • Feb. 11, 2016: Allure sells Rivington House to group of private developers for $116 million.

Mr. de Blasio said Thursday that said he never knew about the decision to lift the deed restrictions or he would have vetoed it. The mayor blamed the decision on poor communication and outdated policies. He added that no one would be fired as a result of the decision. Allure “lied to us,” he said.

Allure attorney Andrew Levander said, “Allure did not lie to the city, as the city’s own internal documents show.”

He said it was “disappointing that our clients have had to endure months of accusations that they supposedly misled the city in connection with the deed removal.”

Eric Phillips, the mayor’s spokesman, said the report “found no evidence that the mayor knew of any part” of the transaction or that any government official was involved in “illegal or unethical behavior.”

The mayor’s office released a memo last week outlining various policy changes to the city’s deed-modification process to “ensure this mistake is never repeated,” Mr. Phillips said.

According to the report, administration officials didn’t object or take steps to make sure Rivington House continued in public use, even as they weighed alternative uses like affordable housing.

EARLIER COVERAGE

As part of the investigation, the agency interviewed about 50 people, including the mayor and other high-level officials, but the report noted that agency investigators faced roadblocks.

The city’s Law Department blocked access to City Hall computers and denied access to documents, the report found. “It is unclear what Rivington-related information remains on the City Hall servers and computers, to which DOI was denied access,” investigators wrote in the report.

A spokesman for the Law Department referred a request for comment to the mayor’s office. Mr. de Blasio said the administration cooperated with the investigation and gave all documents it believed DOI was entitled to have. “There’s been a huge effort by my administration to cooperate,” he said.

Councilman Ben Kallos, a Manhattan Democrat who leads the council’s governmental operations committee, said the report “confirms some of our worst fears” about the role city officials played in the deal.

The report raised a number of questions about the administration’s timeline and account of the deed removal.

Investigators included in the report an email from First Deputy Mayor Anthony Shorris to Mr. de Blasio. In the email, Mr. Shorris forwarded to the mayor a report from a meeting at which Rivington was on the agenda, according to the report.

“Here is the after-meeting report my staff does (the one I showed you),” Mr. Shorris wrote in the email to Mr. de Blasio, dated Aug. 3, 2014. Mr. de Blasio told investigators he didn’t recall receiving the email, according to the report.

In January 2015, a deputy commissioner at the Department of Citywide Administrative Services, the agency responsible for lifting the deed restrictions, approved a memo justifying the removal of deed restrictions on the property. The language was taken directly from lobbyist James Capalino, the report found.

Mr. Capalino, who has close ties to the mayor’s administration, had lobbied the city on behalf of a nonprofit that owned the building before the Allure Group, city records show. A spokeswoman for Mr. Capalino declined to comment.

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The report said Mr. Shorris was informed of the restriction in writing on three occasions, including as early as May 2015. City Hall has said the mayor didn’t learn of the decision to lift the restrictions until 2016.

Two months later, the same deputy commissioner, Randal Fong, deleted references in a report about Allure’s interest in converting the property to condominiums, investigators found. Mr. Fong didn’t respond to requests for comment.

After the restrictions were officially lifted in November, Stacey Cumberbatch, then-commissioner of the Department of Citywide Administrative Services, congratulated agency officials in an email, writing, “Thank you and staff for great work and bringing this to closure in the best interest of the city.”

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In March, Lisette Camilo, who succeeded Ms. Cumberbatch as commissioner this year, contacted the Department of Investigation about possible fraud related to the deed change, according to the report.

The Department of Investigation’s review, which began in March, generated its own headlines when the agency’s commissioner, Mark Peters, who served as Mr. de Blasio’s 2013 campaign treasurer, at first declined to recuse himself from the probe. After facing criticism, Mr. Peters recused himself.

The city comptroller, the state attorney general and the U.S. attorney’s office in Manhattan are continuing to investigate the deal.

Write to Corinne Ramey at Corinne [dot] Rameyatwsj [dot] com