DownWithTyranny!: Is There Any Way To Measure If Cuomo Is More Corrupt Than Christie Or Christie Is More Corrupt Than Cuomo?

Andrew Cuomo and real estate donors (clockwise from left) Joseph Moinian, Jerry Speyer, Daniel Tishman, Andrew Farkas

You shouldn't have been surprised by Bill Rashbaum's stunning revelations about Andrew Cuomo's ethics problems. Ken and I have been warning readers for years that Cuomo is nothing like his father, Mario Cuomo, a pawn of the powerful and wealthy and an avatar of the Republican wing of the Democratic Party. And his corruption is nothing new to anyone who's been paying attention.

Catherine Austin Fitts is a Wall Street bankster type. She was managing director of Dillon, Read, aand worked for George H.W. Bush as Assistant Secretary of Housing and as Federal Housing Commissioner at Bush's Department of Housing and Urban Development (HUD). After Clinton beat Bush, he appointed Cuomo Assistant Secretary and, when he was reelected in 1996, Secretary of that department; he impressed Fitts-- as a criminal. She wrote a fascinating column-- HUD is Being Run as a Criminal Enterprise-- that should be more widely read as Democrats prepare to go to the polls to chose between Cuomo/Hochul and Teachout/Wu September 9.

One of the chief beneficiaries of Cuomo’s ascendancy to Secretary and the subsequent cancellation of the loan sales were the developers, owners and managers of apartment buildings that were subsidized by HUD and often financed through FHA and Ginnie Mae. Ginnie Mae is the HUD unit which guarantees securities issued to finance pools of mortgages insured by FHA. Many of these apartment buildings had been originally financed through tax shelter syndications.

The largest HUD subsidized portfolio at the time was the one owned by Insignia, chaired by Andrew Farkas. On September 5, 2006, as Andrew Cuomo was running for the democratic nomination for Attorney General of New York, Wayne Barrett published "Andrew Cuomo’s $2 Million Man" in the Village Voice. Barrett reported that Cuomo’s compensation from Farkas’s company, Island Capital, in 2004 and 2005 totaled $1.2 million and that Farkas family members and business associates had donated $800,000 to Cuomo’s campaigns since he left HUD. Barrett describes Cuomo’s role as Secretary of HUD in approving an-out-of-court settlement with Insignia (regarding litigation alleging a HUD subsidy being improperly used to pay kickbacks) shortly before Insignia’s sale to AIMCO (Apartment Investment And Managing Company) in 1998.

With Insignia valuations reflecting the benefits of its settlement of the kickback litigation, the cancellation of the HUD loan sales and related policies increasing the private value of HUD subsidized portfolios, Farkas sold out to AIMCO in 1998 for $910 million, described by his attorney as a "fantastic price."

A question that remains unanswered is whether the price of the Insignia sale to AIMCO in 1998 was simply fantastic or whether-- given the pattern of events around it-- it was inflated with government resources and decisions arranged in a criminal manner.

This question raises a second question-- whether the $2 million that Farkas and his network have paid to Cuomo and his campaigns since then represent a kickback from the Insignia sale to AIMCO and whether Cuomo’s compensation is simply fantastic or something more.

…Why did HUD finances melt down under Cuomo’s leadership and what, if anything, does that have to do with the billions flowing to large HUD landlords from the government and the stock market, and the millions now flowing back to Andrew Cuomo and his campaigns years later?

…In 1997, members of my team working with HUD (now led by Cuomo) asked me to authorize Hamilton helping HUD to prepare its next budget using assumptions on the multifamily portfolio that were known to be false. For example, we were to presume that HUD’s apartment portfolio would not be impacted by welfare reform legislation that had been enacted the year before. As federal data indicated that high concentrations of tenants in privately-owned HUD-subsidized housing in large urban areas were getting federal welfare and/or food stamp subsidies, this made no sense. Our assessment was that the combined assumptions that HUD wished to use would make it easier for private owners to displace tenants in a way that would leave the tenants out in the cold without vouchers, while appropriations were preserved to fund project-based subsidies for HUD landlords.

At one point, the Hamilton team leader for our work with HUD came over to my house to try to persuade me that we should help HUD do this. He said that if we did not help HUD with the budget, he was concerned that we would be fired. We agreed that HUD was probably going to persuade the Office of Management and Budget (OMB) that they could trust the budget, because Hamilton helped prepare it; hence, my concern that our involvement would be used to perpetuate a fraudulent budget. I asked him to define the value of our contract in terms of an acceptable level of children going homeless or dying. How many children should we help be forced to the streets so that we could keep our contract? Suddenly, he stopped and said something like, "Why am I doing this? So what if we lose our contract? We have better things to do in our life than be a party to murder." To which I replied, "Now you have it."

I tell this story to remind the reader that we have become a society where the most dangerous serial killers who stalk our land kill with a pen and not with a sword. The most important unanswered question about Andrew Cuomo’s time at HUD goes beyond how or why he and his agency engineered gains into Andrew Farkas, John Ervin and so many other private pockets. The more important question is how many people went without basic necessities because Cuomo diverted resources away from honest taxpayers and the people that HUD was created to serve. How many children in New York and around the country went homeless or worse because vouchers or job training were not available?

This is the most important unanswered question… [A] growing number of investors around the world who do not want to be exposed to the banana republic style corruption now perceived to be epidemic in the United States.

New York is the center of the financial markets in the United States. The health of these markets depends on investors’ faith in the integrity of their governance. The perception that the lead New York regulator is a politician who exploits the power of his or her office for personal ambition and finances will impact the flow and pricing of capital throughout the United States.

My recommendation, to both New Yorkers and members of the US financial and legal establishment concerned with America’s ability to attract capital in global markets, is that they ensure that the unanswered questions relating to Andrew Cuomo’s dealings with Andrew Farkas and Insignia and any other HUD-related  special interests that have financed him and his campaigns be investigated and answered before Andrew Cuomo is permitted to hold public office again.