Derrick Cephas, a Weil Gotshal partner and a NYCHA Board member, abdicates civic responsibility in "demolition by neglect" and privatisation of New York City public housing

Four managers at NYCHA have faced some accountability over a lead poisoning crisis, but it is not known if Federal prosecutors are deliberately aiming low.

  • Will attempts to obfuscate false testimony given by NYCHA CEO Shola Olatoye lead to warnings of witness tampering or obstruction of justice ?

  • The focus on NYCHA appears to be deflecting any scrutiny of private sector landlords or the Municipal water system, which may also be responsible for exposing children to lead.

By LOUIS FLORES

As the New York City Housing Authority has faced one crisis after another, Derrick Cephas has served as the highest-ranking external member of NYCHA's Board of Directors. As such, Mr. Cephas has, since his 2014 appointment as vice chair, been in a unique position to serve as a check on an institutional culture that resists accountability and reform. The controversies engulfing the Municipal housing authority include the giving of false testimony by Chief Executive Officer Shola Olatoye about tenants' exposure, and the risks of exposure, to lead ; a Federal investigation into physical condition standards ; a class-action lawsuit over the exposure to lead ; another class-action lawsuit over mold abatement ; faulty heating and hot water systems during recent frigid Winter snaps ; revelation made by Progress Queens that NYCHA has, in recent years, been engaged in 25,000 Court cases against its tenants annually ; the Authority's pattern and practise of evicting or breaking up tenants' families, sometimes without legal basis but usually alongst racial lines ; and new privatisation deals with real estate developers, who have donated money to the various political committees of Mayor Bill de Blasio (D-New York City).

Generally, organisations seek outside directors, such as Mr. Cephas, for specific qualities, such as having no conflicts of interest and offering fresh managerial worldviews. Yet, Mr. Cephas has, during his service, undertaken no public challenge to the growing signs of failed leadership at NYCHA. It is impossible to know what he has done internally, shielded from public view. Mr. Cephas did not answer requests for an interview or for a response from the law firm, Weil Gotshal & Manges LLP, where he is a partner and head of its Financial Institutions Regulatory practise group. Prior to joining Weil Gotshal, Mr. Cephas served, for five years, as CEO of Amalgamated Bank, but resigned after he could not execute on a financial plan to double the bank's profits, according to a report published by Crain's New York Business. Amalgamated Bank is the largest union-owned bank ; the worldview that Mr. Cephas should be offering NYCHA is one of social responsibility, but that ethos has not been on display.

NYCHA CEO Shola Olatoye, left, has faced calls for her resignation. She signed a false lead paint certification that was voted on by the Board of Directors of NYCHA. It is not known if Derrick Cephas, right, vice chair of NYCHA's Board of Directors, was aware that the Board of Directors was asked to vote to approve the filing of a false instrument. Source : NYCHA/Fair Use

NYCHA CEO Shola Olatoye, left, has faced calls for her resignation. She signed a false lead paint certification that was voted on by the Board of Directors of NYCHA. It is not known if Derrick Cephas, right, vice chair of NYCHA's Board of Directors, was aware that the Board of Directors was asked to vote to approve the filing of a false instrument. Source : NYCHA/Fair Use

According to a report by the New York City Department of Investigation, NYCHA's Board of Directors voted on a lead paint regulation compliance certification in 2016 that was known to some to be false at the time. NYCHA CEO Olatoye, retiring NYCHA General Manager Michael Kelly, and other senior NYCHA executives were said to have known about the falsification of the lead paint certification, according to the Department of Investigation report. It was separately reported that Mayor de Blasio knew of the false lead paint certification, but did nothing. It is not known if the full Board of Directors, who voted on the lead paint certification, were aware that they were voting on a false instrument. The press office servicing NYCHA did not answer requests for interviews with the Authority's Board Members.

Whilst the failure of leadership at NYCHA does not rest solely on Mr. Cephas' shoulders, it is important to note that, as the top outside director on NYCHA's Board, Mr. Cephas has not rallied the Board of Directors to demand that NYCHA CEO Olatoye resign.

Some responsibility for NYCHA's failed leadership must rest, though, with the de Blasio administration, which is attempting to downplay the lead poisoning crisis, including by allegedly using NYCHA as a public punching bag, since, thus far, Mayor de Blasio has refused to raise any questions about the possibility that private landlords or the Municipal water system may be responsible for exposing children to lead. An investigation by the Reuters wire service noted that 5,400 children in New York City had tested positive for elevated blood lead levels in 2015, but there was no exclusivity given in the Reuters investigation to public housing as the source of the lead exposure. Separately, a report published by Progress Queens has shown an upward trend in the level of water-born lead levels.

In an attempt to ringfence NYCHA's senior executives, chiefly CEO Olatoye, from demands for their resignation, Mayor de Blasio has staunchly defended the Authority and its top executive. Instead, the Authority forced Brian Clarke, a senior vice president for operations, and Jay Krantz, a director of technical services, to resign. Luis Ponce, another senior vice president, was suspended for 30 days and demoted, according to a report published by The New York Daily News.

According to the U.S. Attorneys' Manual, an operational "cookbook" for Federal prosecutors, whenever Federal prosecutors investigate public officials, one outcome that prosecutors may seek is the resignation of officials, who are charged with Federal crimes. "Resignation from office, withdrawal from candidacy for elective office, and forbearance from seeking or holding future public offices, remain appropriate and desirable objectives in plea negotiations with public officials who are charged with [F]ederal offenses that focus on abuse of the office(s) involved," the U.S. Attorneys' Manual provides in § 9-16.110. However, it is not known whether the NYCHA officials, who have been removed from office, ever faced the prospect of Federal criminal charges. The U.S. Attorney's Office for New York's southern district has not answered, or has has declined to answer, several requests for information for this report.

Precise details are not known about the current nature and scope of the Federal investigation into NYCHA's physical condition standards. When it was first revealed in March 2016 that NYCHA was the target of a Federal investigation, Reuters reported that prosecutors had opened a civil investigation. However, since NYCHA officials have been resigning, even as Mayor de Blasio has steadfastly defended NYCHA CEO Olatoye, it may indicate either duplicity on the mayor's part or the possibility that public officials figuring in the Federal physical standards investigation of NYCHA may have been facing at least some possibility of criminal charges. Separately, criminal charges were unsealed in 2016 and in 2017 against some officials accused of being responsible, at least in part, for the water-born, lead poisoning crisis affecting residents of Flint, MI.

It is not known if Federal prosecutors would be considering any charges against NYCHA CEO Olatoye for having provided false testimony during a December 2017 City Council hearing. Although the City Council hearing at which the false testimony was given was a proceeding autonomous of the U.S. Attorney's Office, the hearing did take place against the backdrop of the Federal investigation into NYCHA's physical condition standards. Amongst the reported false information given by NYCHA CEO Olatoye at the December 2017 hearing was testimony that NYCHA employees with proper certifications had inspected several thousand public housing apartments. As previously reported by Progress Queens, a March 2016 City Council hearing, which also featured testimony by NYCHA CEO Olatoye, concluded that lead was not a widespread problem, despite tests showing elevated lead levels at NYCHA, including in the drinking water provided to some public housing tenants. Both hearings were chaired by Councilmember Ritchie Torres (D-Fordham), then the leader of the City Council committee on public housing. Although Councilmember Torres has expressed some muted criticism of NYCHA for having exposed tenants to lead poisoning, he has inexplicably stopped short of calling on NYCHA CEO Olatoye to resign, despite having described the situation at NYCHA as "demolition by neglect." Both Councilmember Torres and NYCHA CEO Olatoye support Mayor de Blasio's drive to privatise public housing.

Will Council Speaker Corey Johnson face accountability for appearing to obfuscate the circumstances of Shola Olatoye's false testimony ?

Besides benefiting from political, and possibly legal, cover from Mr. Cephas, Councilmember Torres, and Mayor de Blasio, NYCHA CEO Olatoye also received a boost last week when Council Speaker Corey Johnson (D-Chelsea) attempted to excuse NYCHA CEO Olatoye's false testimony as having been the product of having not been properly briefed before the December 2017 City Council hearing, according to a report published by The Real Deal. It is not known why Council Speaker Johnson would make a public statement in an apparent attempt to obfuscate the circumstances or motivations behind NYCHA CEO Olatoye's false testimony. Erik Bottcher, chief of Staff to Council Speaker Johnson, and the press office that supports the City Council, did not answer advance questions submitted by Progress Queens for this report.

The U.S. Attorney's Office, which is leading the Federal investigation, is known for its aggressive lawyering. Yet, it has apparently taken its time to conduct its investigation of NYCHA. When it was first revealed that NYCHA was the target of a Federal investigation, the U.S. Attonrey's Office claimed that it was a matter of urgency for City Health officials to release health records to Federal prosecutors. Yet, almost two years have since passed. That initial sense of urgency has appeared to have since waned. Moreover, during the conduct of the Federal investigation, the U.S. Attoney's Office has been led by three top prosecutors : former U.S. Attorney Preet Bharara, former Acting U.S. Attorney Joon Kim, and, now, interim U.S. Attorney Geoffrey Berman.

Notwithstanding the slow pace of the investigation, the U.S. Attorney's Office is known for aggressively defending its probes from outside influence. Prior attempts to tamper with witnesses or to obstruct justice, particularly, by obfuscating facts relevant to an investigation by improper use of the media, have been met with legal warnings from Federal prosecutors. When Gov. Andrew Cuomo reportedly attempted to use the press to solicit beneficial statements from, or to tamper with the recollections of, former members of the Moreland Commission, the U.S. Attorney's Office reportedly sent a warning letter to Gov. Cuomo. When Gov. Cuomo later hired a private attorney to review the scandal-ridden Buffalo Billion program, Federal prosecutors again took prompt notice of the possibilities of obstruction of justice. It is not known who gave Council Speaker Johnson the idea to use the media in an attempt to excuse NYCHA CEO Olatoye's false testimony, just as it is also not known if Council Speaker Johnson has since been warned against obstructing justice. These were amongst the advance questions that Mr. Bottcher, Council Speaker Johnson's chief of staff, did not answer for this report.

Because the corporate-owned media did not report about the cover-up of insider knowledge of NYCHA's false lead paint certification until after the November election, there was no way for the public to hold any officials accountable during the 2017 Municipal election cycle. The former chair of the City Council committee on public housing, Councilmember Torres, faced no electoral consequence in response to the physical condition standards scandal at NYCHA, despite his powers of oversight. In the Democratic Party primary of 2017, Councilmember Torres faced no challenger, according to the New York City Board of Elections' voter guide. Primary and general election challengers facing Mayor de Blasio did not materially raise any issue about the toxic living conditions being bourne by public housing tenants.

It is not known whether Federal prosecutors have established whether the senior NYCHA executives, who were aware of the filing of the false certification, included the Board of Directors, and, with them, Mr. Cephas. A preliminary review made by Progress Queens has shown that Mr. Cephas is not so independent as an outside director. Ernie Patron, a former real estate associate of Weil Gotshal, the law firm at which Mr. Cephas is a partner, is now an executive at BFC Partners, a real estate development firm with close political ties to Mayor de Blasio. BFC Partners was one investor selected in secret by NYCHA in 2014 to purchase a stake in a portfolio of project-based, Section 8 housing. A report by Progress Queens showed that it appeared that some of the buildings sold in that portfolio had been renovated in the time leading up to their sale, and that City regulators, including the Office of the Comptroller and the Department of Investigation, were refusing to comment about the terms of the sale. At that time then, NYCHA claimed it could no longer afford the upkeep on the portfolio, but NYCHA officials have not explained why photographs of at least one building showed work scaffolding hanging from the side of one building included in the portfolio. News reports continue to show that politically-connected developers benefit from officials acts by the de Blasio administration that involve the sale, lease, or development of strategic public housing assets. Separately, Progress Queens reported that BFC Partners was chosen to develop 145 new rental units on greenspace in the Ingersoll Houes in Fort Greene, Brooklyn.

Ira Millstein, a senior partner at Weil Gotshal, and Don Capoccia, the founder of BFC Partners, jointly served a blue ribbon panel formed by Gov. Cuomo for disaster storm readiness. The City's top law firms preciously guard there relationships with big businesses, notably real estate developers, which engage in transactions that can generate large legal fees. According to its Web site, Weil Gotshal has a large real estate practise group.