Looking through the federal and state accusations involving SUNY Poly and Alain Kaloyeros

ualbany college of nanoscale science engineering exterior south side

Updated with details from the charges filed by the state Attorney General's office.

As you've probably heard by now, the office of US Attorney Preet Bharara announced public corruption charges against a group of people that includes Joe Percoco, a former top Andrew Cuomo aide, and Alain Kaloyeros, the head of SUNY Poly.

The charges cover allegations that broadly fall into two overlapping categories -- one focused on allegations that Percoco traded his influence inside in the Cuomo admin for bribes (or "ziti" as the money was allegedly referred to), and the other on allegations that Kaloyeros and Todd Howe, another longtime associate of the Cuomos, rigged the application process for large construction projects in Buffalo and Syracuse.

Bharara emphasized Thursday that the complaint includes no allegations against Andrew Cuomo.

The allegations against Kaloyeros are, of course, of great interest in this area because of the huge presence of the College of Nanoscale Science and Engineering. So let's look at some of the bits related to those accusations.

The players in the SUNY Poly allegations

Here's the alleged cast of characters:

Alain Kaloyeros
President of SUNY Poly. You know him.

Todd Howe
He had been working for a law firm doing government relations work and was being paid by developers. He had also been working for SUNY Poly. (The federal complaint alleges that Kaloyeros had hired Howe to help him maintain his status with the Cuomo admin.) On Thursday in a press conference, Preet Bharara called Howe's working for both sides "an inherently corrupt arrangement."

Howe's ties to the Cuomo family stretch back to Mario Cuomo's administration. (In fact, he hired Joe Percoco back in the day.) He has already pleaded guilty to a group of charges and has been cooperating with the feds.

Developers in Syracuse and Buffalo
Specifically, Steven Aiello and Joseph Gerardi, co-founders of COR Development Co. in Syracuse -- COR built two SUNY Poly-related projects in the Syracuse area, that (largely empty) film hub and a manufacturing facility. And Louis Ciminelli, Michael Laipple, and Kevin Schuler of LPCiminelli -- the company building the massive Solar City factory in Buffalo as part of the Buffalo Billion.

What's alleged, very quickly

Here's the allegation, condensed into one sentence: The feds say that Alain Kaloyeros and Todd Howe, a longtime Cuomo associate who was working for both developers and SUNY Poly, collaborated with developers in Syracuse and Buffalo to rig the bidding process for major projects so the process would favor specific developers.

What's alleged, somewhat longer

And the allegation at greater length: The feds say that Kaloyeros and Howe collaborated to write the requests for proposals for projects in Syracuse and Buffalo administered by the Fort Schulyer Management Corporation -- the SUNY Poly real estate and development arm that handled projects outside the Albany area -- so that the specifications would be tailored for developers that had contributed to Andrew Cuomo's campaign fund. In the language of the complaint, Fort Schuyler was "defrauded" by these actions because it was deprived of a fair and competitive bidding process.

From the federal complaint:

68. As part of this scheme, the Syracuse Developer and the Buffalo Developer paid bribes to Howe, which were purported to be "consultancy" payments and bonuses but which were in fact payments for Howe's actions in his capacity as an agent and representative of CNSE and the Research Foundation who had, along with ALAIN KALOYEROS, a/k/a "Dr. K," the defendant, substantial control over Fort Schuyler's State-funded development projects. In exchange for the payments to Howe, and as described more fully below, Howe worked with KALOYEROS to defraud Fort Schuyler by secretly rigging the bids for large development deals so that they went to the Syracuse Developer and the Buffalo Developer, while falsely representing to Fort Schuyler that the bidding process was fair, open, and competitive. In particular, as set forth below, (a) KALOYEROS caused Fort Schuyler to issue purportedly competitive requests for proposals ("RFPs") for companies to be named preferred deelopers for CNSE in Buffalo and Syracuse, where CNSE intended to undertake significant development projects paid for under the Buffalo Billion initiative and other state development programs; (b) KALOYEROS and Howe secretly tailored the RFPs so that the RFPs requested qualifications held by the Syracuse Developer and the Buffalo Developer. For his part in the scheme, KALOYEROS was able to maintain his leadership position and substantial salary at CNSE and garner support from the Office of the Governor for projects important to him, including the creation of SUNY Poly.

To support the allegations, the federal complaint cites email exchanges involving Kaloyeros, Howe, and the developers that it alleges indicate conversations about how to tailor the RFPs. These emails also point to the players understanding they should be trying not to make what they were doing obvious. (Example: The complaint alleges a note written on a section of the draft for the Syracuse RFP that focused on specific software systems included the phrase "too telegraphed?")

And the complaint alleges that Kaloyeros recused himself from the Fort Schuyler board vote about the projects in order to further distance himself from the alleged setup:

I believe KALOYEROS did so in order to continue to deceive the other members of the Fort Schuyler Board of Directors into believing that the bidding process was fair, open, and competitive, when in fact KALOYEROS had manipulated the process so that the Syracuse Developer and the Buffalo Developer would be chosen regardless of whether KALOYEROS was involved in the voting.

During the Thursday press conference, Bharara called the alleged request tailoring as "just another way to corruptly award cronies willing to pay to play."

The specific charge against Kaloyeros is wire fraud conspiracy.

More charges, this time for projects in Albany

Thursday afternoon, the state Attorney General's office announced charges against Kaloyeros and Joseph Nicolla, the president of Columbia Development. From the press release:

According to the felony complaint, Kaloyeros, a government official, engaged in an ongoing scheme to direct the contracts for government financed projects to favored companies, including Nicolla's company, Columbia Development. Rather than use a fair and competitive process to award contracts, Kaloyeros allegedly improperly used the Request for Proposal process to award certain contracts for the construction of facilities for SUNY Poly.

They've been charged with "Combination in Restraint of Trade and Competition" -- three felony counts for Kaloyeros, and one for Nicolla. Here's the complaint.

The complaint alleges Kaloyeros was involved with three separate schemes. The one allegedly involving Columbia Development was for a proposed SUNY Poly student housing project. (Columbia had acquired land near the CNSE campus on what was then called Loughlin Street.) And the complaint alleges that Kaloyeros and Columbia colluded to set up the RFP to favor Columbia. The outline of the alleged scheme is similar to ones alleged in the federal charges.

(There have been rumblings about this for months. When the Business Review reached out to other developers to find out why they didn't bid on the student housing project, one anonymous developer said "We thought someone had an inside track" -- because the request was so specific.)

The other two alleged schemes included hiring of firm for the construction of a nanofab building, and an arrangement with an architecture firm that had taken space on the CNSE campus.

The federal complaint

Here's the federal complaint against Percoco, Kaloyeros, and others:

Federal Complaint Against Percoco Et Al by alloveralbany on Scribd

State Attorney General's complaint

NYS OAG Kaloyeros Nicolla Felony Complaint by alloveralbany on Scribd


Elsewhere

Some of the extensive coverage of the charges:

+ NYT: Ex-Cuomo Aides Charged in Federal Corruption Inquiry

+ TU: SUNY Poly President Kaloyeros, Cuomo confidant Percoco charged

+ Post-Standard: Two COR executives charged in federal probe of Cuomo development projects

+ Buffalo News: Local developer among nine facing charges in bombshell state corruption case

Comments

so I wont seer Dr Nano's Ferrari driving around Albany anymore?

Thanks AOA for breaking this down for (me) us!

“It turns out that the state Legislature does not have any kind of monopoly on crass corruption in New York,” said Bharara, whose office won convictions of former top lawmakers Sheldon Silver and Dean Skelos last year. (TU)

At least Bharara is acknowledging the role that private sector boodlers play in facilitating public corruption in these cases by including some businesses in this criminal complaint.

This is disgusting. We left New York (Albany) all together in part due to the blatant corruption. This article further solidified our rational for leaving.

Count me among the people who consider the accusations against Dr. K quite troubling. But while I applaud any effort to root out public corruption, his methods have proven to be the only effective means of economic development in upstate NY in decades. Hell, a century. I truly doubt whether any CNSE/SolarCity/GloFo employee who moved to the capital region/buffalo from another continent actually cares whether Dr. K complied with each and every RFP requirement. I personally couldn't care less because I respect the results. So as much as I admire the hard work of Schneiderman and Bharara, I can't help but wonder whether they've run out of more important things to do?

Just leaving this here for the lawls.

http://gothamist.com/2015/10/08/highly_paid_state_worker.php

@Bob,

I hear you. Nano has been great for Albany and upstate, but the ends just don't justify the means. This was public money being steered in exchange for political donations and bribes. It didn't need to happen for those businesses to come here. (In fact we might have gotten better deals if it hadn't.)

Dr. K may be a brilliant businessman but if this is true he screwed up royally. I will grant you that it can be tricky to write an RFP that is vague enough to be competitive but specific enough to carry out your vision, but even if he had no nefarious intent he's smart enough to know what impropriety looks like. And I suspect the prosecutors have found too many coincidences between the RFP requirements and the inside bidders credentials for it to be chance.

If he was truly interested in acting in the taxpayers best interests he should have told Todd Howe to shove off and threaten to drive off in his Ferrari. But I don't think that's the kind of relationship they had.

I wish this was found out before they ruined our backyards. There are no more trees, just college students here. Probably who are all being tracked by microchips. Thanks. I do miss seeing that Dr Nano Ferrari though. The beautiful site of that car made up for the reduction of oxygen in the area.

As far as I can tell, Kaloyeros did not benefit financially from the "corruption" and he brought a kick ass economic development and world class research project to Albany. I'm willing to look the other way.

It is a little concerning that folks want to turn a blind eye on this type of activity, because of the ends. You would think that after the financial crisis, which while cause by a whole host of unethical or greedy misdeeds saw the house of cards come down predominately due to banks re-packaging good loans with a lot of crap, in order to get rich by selling it off to the next banker (who naively bought Grade A securities that were really Grade F horsepucky; or more unethically, took a risk of buying only to quickly resell to the next dup of a bank at a profit). And when the house of cards came down, it was the taxpayer who foot the bill to bail banks out for their unscrupulous behavior, or the debtor who saw their home go underwater. Often, those who conducted the activity may not have personally benefited (which may be the case with Dr. K), but others still payed for the behavior.

Again, I have to love it when people defend business men for engaging in unethical behavior, often ripping off the shareholder, or in this case the tax payer (since they were primarily playing with taxpayer money here), but how dare a politician do it—they should be shot for that. In this case, you have taxpayer money being used to grease the wheels for particular interests. In addition to what looks like unnecessary payment to consultants/lawyers, but preferential treatment may have led to bids that could be well north of what a competitive bid may have identified. Maybe my standards are too high and I should expect that I have to pay a little in graft in order for the whole system to work—especially in our state where it can be quite vexing to business development—then again, how does the collective taxpayer ultimately make a decision on how much that graft should add up to (5%, 10%, maybe 20% of your taxpayer dollar going towards graft to get the job done; what would you be comfortable with for the results we’ve seen).

Secondly, while I love what this has done for development in the region, this could spill out across the up-state economy, given Cuomo’s government meddling in trying to spread the wealth across Utica, Rochester, Buffalo, etc. Granted I’m biased since I would have loved to have seen this development stay in the region, but rather than letting the economy organically grow and allow the benefits of clustering to play out (though, not without a large dose of government cash or tax breaks to serve as a catalyst), bureaucrats have stepped in, telling what jurisdictions get off-shoots of the development associated with the cluster and picking and choosing which regions get to see tax breaks or government aid to foster development. If things get truly nasty here, a lot of upstate New York could be affected. However, despite my reservations on how things were conducted, I think the jury is out on how negatively this will impact things. I’m actually optimistic that by draining the swamp, good things may result, since it sounds like these misdeeds were grinding through the rumor mill, which may have been gunking up potential private and/or public development associated with the nano/chip fab cluster.

My question is - do we really know how much economic benefit the region has received from these ventures? This is definitely not my area of expertise, but I know of researchers who attempted to get info on money put into these projects to study what the multiplier effect was. They were unable to get any hard numbers at all. What should be open info was a brick wall. Maybe more tax money was given to these projects than was every put out in terms of jobs and economic development.

I don't solely blame Dr. K., though. He was excused from lots of the standard oversight that is required of SUNY-funded projects, grants monitored by the SUNY Foundation, etc. Everyone in high places gave him the "wink-wink, nudge-nudge" for a decade, at least.

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