Schneiderman, Bharara mum on ProPublica 421-a investigations [Updated]


After reports published by ProPublica have shown that some of the city's most politically-connected real estate developers have been withholding an estimated 50,000 apartments from offering regulated rents to tenants, New York's top prosecutors are mum about the findings.

The offices of State Attorney General Eric Schneiderman (D-New York) and U.S. Attorney Preet Bharara would not answer requests made by Progress Queens for interviews about a series of investigations by the ProPublica journalists Marcelo Rochabrun and Cezary Podkul.

During the current affordable housing crisis, an estimated 50,000 New York City apartments are not subject to rent regulations, even though landlords of those apartments had agreed to such treatment after the landlords received tax abatements for their apartment buildings under the controversial 421-a program.  

The violations made by the 421-a landlords include systematically overcharging tenants in rent by raising their « preferential rents » by rates in excess of orders issued by the Rent Guidelines Board, which typically sets the maximum rent increases available to landlords in respect of rent-regulated apartments.  As reported by Progress Queens, landlords overcharge tenants of rent-regulated apartments when the leases are subject to preferential rents.

Some of the largest real estate developers in New York City, such as Two Trees Management, have been ensnared in the ProPublica investigation.  In respect of one building alone, Two Trees overcharged tenants by almost $400,000 in rent.

According to the most recent ProPublica report, Two Trees has donated $100,000 through a limited liability company (LLC) subsidiary to one of City Hall’s nonprofit lobbying arms, the Campaign for One New York.   Two Trees is represented by the same lobbying firm, BerlinRosen, that also advises the Campaign for One York, an entity that lobbies for the support of the political agenda of Mayor Bill de Blasio (D-New York City).  

Last week, State Attorney General Schneiderman announced that his office had reached an agreement with many landlords operating small-sized, 421-a apartment buildings that were in violation of rent regulations.  However, the accord reached by State Attorney General Schneiderman will result in less than 2,000 apartments being returned to rent regulations.  There’s no indication what will happen to the other 48,000 apartments that ProPublica estimates that 421-a landlords have withheld from the rent regulation system.

Twice this year, State Attorney General Schneiderman's office has denied Freedom of Information Law requests filed by Progress Queens seeking complaints filed with his office by tenants of 421-a affordable housing units, and the disposition of such complaints.

Past investigations have shown that large real estate developers are able to influence government policy by making large campaign contributions through webs of LLC entities that eventually reach campaign committees controlled by elected officials.  Efforts have been unsuccessful to close the LLC loophole that allows wealthy campaign contributors to exploit campaign finance regulations.

At a speech delivered on 23 January 2015 at New York Law School, U.S. Attorney Bharara decried the influence of money in setting government policy, particularly by government officials, who have a say at what rents New Yorkers pay.  At one point in his remarks, made the day after charges had been announced against former State Assembly Speaker Sheldon Silver (D-Lower East Side), U.S. Attorney Bharara said, « While I continue to believe that public corruption in New York is more than a prosecutor’s problem, you should rest assured that the people in my office are extremely busy and will continue to do what prosecutors do.  And that means being as aggressive and proactive on pubic corruption as we are on gangs and drugs and organised crime and insider trading and everything else. »

The City Hall press office refused to comment for this report.

One of the founders of BerlinRosen is Valerie Berlin, a former staff member of State Attorney General Schneiderman when he was a state legislator.  BerlinRosen has also worked as a campaign consultant for State Attorney General Schneiderman.

For previous Progress Queens reports, the press office of U.S. Attorney Bharara has refused to address the relative inaction by local and state prosecutors to probe corruption.  In 2014, The New York Times published a bombshell report that showed that investigations by states' attorneys general can be influenced or thwarted by lobbyists.