Wall Street Journal City Agency at Heart of Rivington Deed Deal Wields Vast Power by Mara Gay and Josh Dawsey

Wall Street Journal
Wall Street Journal
City Agency at Heart of Rivington Deed Deal Wields Vast Power
Mara Gay and Josh Dawsey
04/24/2016
The building at 45 Rivington St.
The building at 45 Rivington St. PHOTO: AGATON STROM FOR THE WALL STREET JOURNAL

At the heart of the Manhattan land deal that has triggered official investigations and sent shudders through New York City’s political culture is a little-known municipal agency that has come to wield enormous power.

The Department of Citywide Administrative Services manages city-owned buildings; oversees the hiring process for civil servants, such as firefighters and police officers; and oversees the purchases of more than $1 billion in goods and services every year. It hosts auctions of city-owned vehicles at the Brooklyn Navy Yard and supplies cars and drivers for high-ranking city commissioners. Its janitors clean the marble corridors of City Hall.

The department also buys, leases and auctions city property, a role that involved it in the land deal that has caused problems for Mayor Bill de Blasio. In November, the Allure Group paid the agency $16 million to lift a deed restriction at 45 Rivington St. that required the Lower East Side property to be used as a not-for-profit. The company had operated a residential health-care center known as Rivington House on the site.

Soon after the deed was modified, the Allure Group sold the building to a developer for $116 million with plans to convert it into luxury condominiums. The deal netted the company what appears to be a $72 million profit. The buyer and a nonprofit that sold the building to the Allure Group both had ties to top lobbyist James Capalino, who has raised money for Mr. de Blasio.

The deed modification was approved by Ricardo Morales, a senior official with the Department of Citywide Administrative Services. Mr. Morales couldn’t be reached for comment.

The U.S. attorney’s office is looking into the deal, people familiar with the matter have said, as is the state attorney general’s office and city Comptroller Scott Stringer. Mr. de Blasio has said he didn’t know about the deed modification until it was reported.

Asked last week about the deal, the mayor said he didn’t “have the illusion that I’m going to know about everything all the time.” The city has suspended the deed-restriction process.

“I have pushed very hard to the deputy mayors and the agency heads to recognize that we need information on key decisions at City Hall,” Mr. de Blasio said, “and there are certain decisions that can only be made at City Hall.”

A spokeswoman for the Department of Citywide Administrative Services didn’t respond to a request for comment.

At the time of the deed modification, the department’s commissioner was Stacey Cumberbatch, who was appointed by Mr. de Blasio in 2014. She resigned in January. No reason was given for her departure, and she moved to an administrative job with the public hospital system NYC Health + Hospitals.

Stacey Cumberbatch in January 2014.
Stacey Cumberbatch in January 2014. PHOTO:BRYAN SMITH/ZUMA PRESS

While the agency is now viewed internally as problematic, it hadn’t received much attention from the mayor’s office because it had little role in advancing Mr. de Blasio’s political priorities, according to a person familiar with matter. Once City Hall learned of the deal, there was widespread confusion about deed restrictions, this person said.

Mr. Capalino, who was commissioner of the agency during the first term of former Mayor Ed Koch, said the agency was difficult to run because it has functions not tied to one another.

“I never really got the feeling that Stacey was experientially qualified to handle a very complicated agency,” said Mr. Capalino, who said he had met with Ms. Cumberbatch and with her staff on many occasions. “She just didn’t seem to be on the radar screen that much in terms of accomplishments.”

Mr. Capalino has been subpoenaed in the deed-modification matter; he advised two parties involved at various times in the issue. He has denied wrongdoing.

Through a spokesperson, Ms. Cumberbatch declined to comment. She worked as chief of staff at the New York City Housing Authority and as special counsel in the city Law Department in the administration of former Mayor Michael Bloomberg.

James Capalino in spring 2014.
James Capalino in spring 2014. PHOTO: CLINT SPAULDING/PATRICK MCMULLAN

Since the deed modification became public, officials from the New York City Economic Development Corporation have been asked to study the real estate functions of the Department of Citywide Administrative Services, among other matters.

The City Council is expected to hold a hearing on the deal in early May, said Councilman Ben Kallos, who chairs the committee on governmental operations, which includes oversight of the Department of Citywide Administrative Services.

Former senior officials who worked in previous administrations said the powers of the department had grown over the years. It was formed in 1968 under former Mayor John Lindsay as the Municipal Services Agency.

In the 1990s, under Mayor Rudy Giuliani, the agency merged with the Department of Personnel. It now commands an annual budget of $1.2 billion and employs 2,000 people.

The former officials said the department should have flagged the Rivington House deed modification to the mayor’s Office of Contract Services and the Law Department. A lawyer for the mayor signed the deed modification, but Mr. de Blasio said he wasn’t aware the lawyer signed it.

Fritz Schwarz, a former corporation counsel who led a 1989 commission that helped rewrite the city charter, said an agency with the substantial powers of the Department of Citywide Administrative Services should operate under the close eye of the mayor’s office. “There should be transparency in what they do,” he said. “Decisions at some level should have to get an approval by a higher authority.”