Stringer investigating deal that allowed AIDS nursing home to be sold for luxury condo conversion


Comptroller Scott Stringer (D-New York) is investigating the process by which deed restrictions were lifted from Rivington House, the former AIDS nursing home in the Lower East Side, allowing it to be sold for a luxury condominium conversion.

The deed to the site of Rivington House had restricted its use to a nonprofit healthcare facility. The restriction was lifted by the New York City Department of Citywide Administrative Services, and that decision is the subject of Comptroller Stringer’s investigation.

In 2014, the former owner of Rivington House, VillageCare, retained the firm of Capalino + Company to lobby each of the Department of Citywide Administrative Services and the New York City Human Resources Administration in connection with deed restrictions, according to online records of the Lobbying Bureau of the New York City Clerk’s Office. Although that lobbying effort failed to lift the deed restrictions, VillageCare closed its AIDS nursing home and sold Rivington House to Allure Group for $28 million, according to a report filed by the journalist Rebecca Davis O’Brien for The Wall Street Journal.

After Allure Group successfully negotiated for the lifting of the deed restrictions by paying the Department of Citywide Administrative Services a one-time payment of $16 million, Allure Group sold Rivington House to a joint venture including an affiliate of Slate Acquisition LLC for $116 million. Before the Department of Citywide Administrative Services agreed to lift the deed restrictions, Slate Acquisition LLC had retained Capalino + Company to lobby three municipal departments regarding building and environmental issues, online records show. In a report published by The New York Daily News, a representative for Capalino + Company denied that the lobbying firm acted on the purchase by the Slate joint venture.

According to the report published by The New York Daily News, the $16 million fee paid by Allure Group to the Department of Citywide Administrative Services was based on an appraisal that valued Rivington House at $64 million, or $52 million less than what the Slate joint venture paid Allure Group for the site. In addition to investigating the process that led to the lifting of the deed restrictions, the office of Comptroller Stringer is also reportedly investigating the appraisal.

Neither the offices of Comptroller Stringer nor Department of Citywide Administrative Services Commissioner Lisette Camilo answered requests made by Progress Queens for an interview for this report. The questionable lifting of the deed restrictions took place under Commissioner Camilo's predecessor, Stacey Cumberbatch, who quietly left her post before word of the controversial real estate transaction was made public.

Besides apparently having a hand at the luxury condominium conversion of Rivington House, Mr. Capalino has also served as a lobbyist on the $1 billion luxury condominium and townhouse conversion of St. Vincent’s Hospital.

As has been widely reported, Mr. Capalino has bundled large sums of campaign contributions for Mayor de Blasio. In turn, Mayor de Blasio’s reliance on big money donors for political and financial support has come under legal scrutiny. One of Mayor de Balsio’s funding structures, the Campaign for One New York, has received money from Mr. Capalino. As reported by Progress Queens, the activities of the Campaign for One New York are reportedly the subject of law enforcement interest and the target of separate investigations by the New York City Conflicts of Interest Board and the New York City Campaign Finance Board.

Inconsistency in investigating real estate developers, their lobbyists, and their political enablers

New York City Comptroller Scott Stringer is investigating the process by which the de Blasio administration approved the luxury condo conversion of a former AIDS nursing home at Rivington House. Comptroller Stringer has an uneven record for investigating potential real estate corruption. Source :  New York City Comptroller's Office/Official Photograph/Public Domain

New York City Comptroller Scott Stringer is investigating the process by which the de Blasio administration approved the luxury condo conversion of a former AIDS nursing home at Rivington House. Comptroller Stringer has an uneven record for investigating potential real estate corruption. Source :  New York City Comptroller's Office/Official Photograph/Public Domain

Whereas Comptroller Stringer has decided to investigate the process by which the deed restrictions were lifted on Rivington House, his office has not been consistent about investigating allegations of wrongdoing in the flipping of important real estate. After Progress Queens raised questions about the sale of a portfolio of project-based, Section 8 apartment buildings by the New York City Housing Authority, for example, each of the office of Comptroller Stringer and the New York City Department of Investigation declined to answer questions about that sale transaction. Moreover, when Mr. Stringer was Manhattan Borough President, he supported the luxury condominium conversion of St. Vincent's Hospital. (The process by which St. Vincent's Hospital was closed and converted into luxury housing was noted as one example in a special report published by Progress Queens about the lack of democracy in New York City's land use process.)

Because the change in the deed restrictions for Rivington House was effected before Allure Group sold the former AIDS nursing home to the joint venture of real estate developers, the nursing home operator potentially faces more legal scrutiny than the joint venture that made the lifting of the deed restrictions a condition of its purchase. This pattern of evading legal consequence is commonplace for large real estate transactions that trigger public scrutiny.

Because of voters’ sensibility that New York’s municipal government should ensure that economic gains are used to help those most in need, the only way that strategic public assets, like nonprofit nursing homes, can land into the hands of real estate speculators is by a corrupt process that undermines the consent of city residents. If this corruption rises to the level of financial crimes, then the public relies on regulators, law enforcement agencies, or municipal and state prosecutors to undertake anti-corruption programs or actions.

However, because of the outsized role of money in politics and because real estate developers make large campaign contributions to elected officials, including to Mayor de Blasio, elected government officials lack the courage to investigate real estate corruption. Additionally, lobbyists are allowed to make campaign contributions, as well as to act as bundlers of campaign donations, increasing their role in the fundraising success of campaign committees. In particular, the chief municipal and state prosecutors, who are elected to office, are politically vulnerable if they pursue real estate corruption investigations, due to the prosecutors’ reliance on fundraising for their campaign committees. If a prosecutor is seen as threatening to bring corruption charges against big money interests, including real estate developers and their lobbyists, then big money interests can withdraw their financial and political support from the idealistic prosecutor.

As has been repeatedly reported by Progress Queens, municipal and state prosecutors appear to tolerate corruption in New York City. As a consequence of this apparent toleration, Progress Queens has repeatedly asked Federal prosecutors with the U.S. Attorney’s Office for New York’s southern district for an explanation of the dearth of municipal and state corruption investigations and prosecutions. Federal prosecutors have declined to provide an explanation for this dynamic. U.S. Attorney Preet Bharara has in speeches to the public signaled that sometimes the just action for a prosecutor is to not bring an action against a target ; in speaking generally about industry-wide issues pertaining to compliance with the law, he has expressed support for self-policing.

In the past, attorneys from the Association of the Bar of the City of New York have intervened and proposed reforms whenever law enforcement have been unable to address corruption ; indeed, it was a pattern of corruption amongst judges and lawyers that led to the formation of the City Bar. During the Great Depression, when then State Senator Samuel Hofstadter (R-New York City) had accepted a judicial appointment from Tammany Hall when he was investigating Tammany Hall for corruption, the City Bar held that State Senator Hofstadter had violated the public trust. Actions by the City Bar like that no longer take place.

In October, Progress Queens attempted to engage in a conversation with the City Bar about possible conflicts of interest facing prosecutors. A representative of the City Bar referred Progress Queens to a law professor, who was not available for an interview with Progress Queens.

Real estate speculation of healthcare facilities play role in their closure ; AIDS-related care is seen as taking a hit

Several independent major healthcare facilities have either closed or have been subsumed by other healthcare corporations in a bid some have said has been designed to prop up the larger and wealthier healthcare facilities in Midtown, the Upper East Side, and the Upper West Side of Manhattan. In 2013, for example, New York Downtown Hospital was merged into New York-Presbyterian Hospital. Converging with the contraction of complex healthcare services in Lower Manhattan is the pressure of real estate speculation.

The end of AIDS nursing home care at Rivington House follows the end of comprehensive AIDS care at St. Vincent’s Hospital, which closed in 2010, after Rudin Management Company called in a mortgage made by the nonprofit charity hospital. Although the hospital had been losing money, its finances took an immediate dive thereafter. Since healthcare facilities occupy big, bulky buildings on large plots, they make prime targets for real estate speculators seeking to convert or build luxury condominiums in Manhattan’s rapidly gentrifying neighborhoods.

The collapse of healthcare facilities comes at a time when politicians are increasingly seeking healthcare cuts, witnessed when the Berger Commission and the Medicaid Redesign Team mandated waves of hospital closures, and which could also be seen in the lip service given by politicians to advocates for improving AIDS healthcare. Although people with AIDS can still suffer painful deaths, as befell the activist Spencer Cox, and proposed treatment regimens, like pre-exposure prophylaxis, or PrEP, can, in rare circumstances, lead to drug resistance, public health solutions are not forthcoming. A plan to bend back the HIV infection rate in New York state, for example, was initially supported by Gov. Andrew Cuomo (D-New York) before he refused to adequately fund the plan.

Whereas New York’s LGBT community, hard-hit by HIV/AIDS, have stepped up criticism of Gov. Cuomo, LGBT activists have been slow to be critical of Mayor de Blasio. When another lobbyist with close ties to Mayor de Blasio, Scott Levenson, was revealed to have worked for a right-wing group that opposed same-sex marriage, the LGBT community largely gave Mayor de Blasio a pass. It is not yet known how the LGBT community will react to news about Mr. Capalino's role in closing a strategic AIDS healthcare facility.

The pattern to Mayor de Blasio’s claim of ignorance of controversies in his administration

After Comptroller Stringer obtained the sought-after records, The Wall Street Journal reported that Mayor de Blasio ordered the Department of Investigation to open a probe of the transaction in a move that some said was an effort at containment. The Department of Investigation, an independent investigatory body of New York City government, is headed by Commissioner Mark Peters, a long-time ally and former campaign committee treasurer of Mayor de Blasio.

The report in The Wall Street Journal claimed that Mayor de Blasio was unaware that the Department of Citywide Administrative Services had been lifting deed restrictions on real property to facilitate real estate speculation. This marks the third major controversy over which Mayor de Blasio has feigned ignorance. After it was revealed that the U.S. Attorney’s Office was investigating NYCHA over possible false financial claims and lead poisoning, Mayor de Blasio claimed that he had learned of the probe on the day when Federal prosecutors obtained a court order compelling the release of municipal health records, even though the Federal investigation began as long ago as October. In 2015, following the controversial sale by NYCHA of a portfolio of project-based, Section 8 buildings to a consortium of real estate developers with close political ties to the de Blasio administration, Mayor de Blasio claimed that he was not familiar with the specifics of the sale.

The credibility of another de Blasio administration official has also come into question in the face of scrutiny. New York Police Department Commissioner William Bratton was reported to have misled the family of Ramarley Graham by wrongly informing them that the NYPD could not investigate or discipline the police officers involved in the raid and shooting that cost the young Mr. Graham his life. Previously, Commissioner Bratton has on at least one occassion provided questionable testimony to the New York City Council. That testimony involved information he provided about police use of force, and Commissioner Bratton's testimony was questioned by City Council staffer Artyom Matusov, who, in turn, was later fired in a retaliatory act against the whistleblower.

The repeated claims of ignorance or misinformation appear to contradict procedures that Mayor de Blasio has instituted to prevent or contain any controversy. For example, the mayor’s office vets requests made under the state’s Freedom of Information Law that may reveal documents that may embarrass his administration. Furthermore, any change in administration policy that may result in controversy is subject to an excruciating process of review and debate that begins with the creation of a decision memorandum that must be circulated amongst Mayor de Blasio’s highest-ranking political advisors.

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