I recently had a dust up here on DG about developer money in City Council elections centering on a candidate named Brad Lander. In resulting discussions both on and off line, I realized how in people's blind focus on developers, either pro- or anti-, what is ignored is the massive conflict of interest that permeates NYC politics where corporate interests (developers and others) donate so much money to politicians that it often determines who wins, and those very same corporate interests get major favors from politicians.
I also recently had a confrontation with Marty Markowitz at an IND meeting where I took exception to being called "anti-development" because my opposition is NOT to development per se, but to the overwhelming influence of developers in NYC politics and the lousy policies it buys them that hurts the community but lines the pockets of developers. An example is the city actually BUYING the land for Bruce Ratner so he can build his Atlantic Yards project at the same time fire houses are being closed and schools getting over crowded thanks to funding cuts.
Marty Markowitz, with his typical faux-amiable guffaw, simply said, "I disagree and we can agree to disagree."
Of course he failed to address my actual concerns at all. And the recent scandal revealed by Andrew Cuomo just makes my point very well in a broader context. This scandal involves pension funds, politicians, political favors and the disgusting way in which corporations fatten themselves through their bought politician pets.
Josh Wolf-Powers, a former aide to Comptroller Bill Thompson, is the guy who advised Steven Rattner’s company, the Quadrangle Group, to hire the now-indicted Hank Morris as its placement agent. True News from ChangeNYC points out that this was the same year Josh Wolf-Powers the Comptroller's found the company Blue Wolf Capital Management.
And it was Blue Wolf Capital Management that was the focus of a discussion here on Daily Gotham because they were a major donor to Brad Lander and a Lander supporter was defending Blue Wolf.
Let me be clear, this does not mean Brad has done anything wrong. Or that Blue Wolf donating to Brad is illegal. What it means is that people who defend Blue Wolf as an acceptable political patron is missing the whole point of conflict of interest and pay-to-play. Blue Wolf is a company, founded by former government employees, who donate to political candidates AND who have as an investment strategy the involvement of government agencies in turning around companies. From Blue Wolf Capital's website:
Many middle-market private equity firms shy away from companies for which the federal government, federal agencies, or state or local governments or government entities, are major factors in the value chain.
Government contractors and companies in industries driven by government procurement, policies or subsidies have a set of common issues which we specialize in addressing:
Long sales cycle: Sales cycles in the public sector often are long and relationship-driven. A private equity owner working in these markets must have the patience to understand the sales cycle, and the relationships and relationship-management experience to enhance a company’s results. We have these relationships and skills.
Political risk: Understanding value in certain companies requires the ability to underwrite political risk. In the public sector, the difference between rhetoric and reality can be large, and the competing demands of policy and operations can create apparent contradictions. Few middle-market private equity firms have the experience to assess and value these risks; we believe that our experience in the public sector gives us this experience.
Unusual financing requirements: Federal, state and local governments and governmental agencies often defer or delay payments, resulting in unpredictable and lumpy cash flows. This can lead to unusual financing challenges; we have experience in structuring around these challenges.
In and of itself this could be a reasonable investment strategy. EXCEPT that this is being done by people with government connections who donate large amounts of money to politicians who may directly or indirectly be involved in governance issues that may affect their investments, AND one of their founders is near the center of this major scandal Andrew Cuomo is investigating. Again, Josh Wolf-Powers is THE GUY who hooked up Rattner and Hank Morris, the two people at the center of this scandal.
To quote True News from ChangeNYC:
Blumenthal and Wolf-Powers’ Blue Wolf Capital Management, like Hank Morris’ firm Searle, specializes in drumming up pension fund business for private investors. Under a section entitled “Government in the Value Chain”, Blue Wolf’s company website states, “Many middle-market private equity firms shy away from companies for which the federal government, federal agencies, or state or local governments or government entities, are major factors in the value chain. Government contractors and companies in industries driven by government procurement, policies or subsidies have a set of common issues which we specialize in addressing.” According to its website Blue Wolf is particularly well-suited for government procurement work, because “each member of our investment committee has served as a public official.”
Political donations often create conflicts of interest and it is those conflicts of interest, not just developers, that are a corrupting influence. And in many cases the "no developer money" pledge in no way removes such potential conflicts of interest. "No corporate donations" pledges go further in avoiding these conflicts of interest, though not always completely.
Is it a conflict of interest for a person fishing for a judgeship to make political donations to the very people who can offer him an appointed judgeship? Of course it is and it actually is illegal to buy a judgeship. This kind of conflict of interest has dogged Brooklyn judges, landing some in jail and damaging the chances of others when they later (after failing to buy a judgeship) ran for a judgeship.
And is it a conflict of interest when a company whose stated purpose is to buy undervalued companies and use negotiations with government to secure a better financial situation for those companies to donate to political candidates who may very well be part of the government making decisions that will turn that company a profit? Of course it is a conflict of interest. But this conflict would be ignored under the knee jerk "no developer money."
And it is a conflict of interest for Bill de Blasio (running, rather cynically perhaps, for NYC Public Advocate) to take gobs of money from the billboard industry right before advicating that NYC should: "Leave billboards ALONE!" It is amazing how $8000 from the industry got de Blasio's advocacy skills so active advocating for that same industry. Yet this is not developer money influencing a politician and would be missed in the "no developer money" pledge.
To see who a politician is beholden to, look to where their donations come from, keeping in mind that a name on a donor list may not reveal their industry without a search. It is worth noting that developers donate to Melinda Katz so much yet, along with lawyers, still hedge their bets by donating to Weprin and Yassky as well. It is worth noting that Weprin also gets donations from the garage and horse carriage industries and this seems in line with his legislative stands. It is worth noting that Vito Lopez is showered with money from developers and, go figure, chiropractors. Of course the people least beholden are the ones who bring in money mainly from average folks with little to spare, so they bring in the least money and so have the toughest time winning. Norman Siegel, running for Public Advocate, is so scrupulous about donors and so scrupulous about not being influenced by big money that it is hard for him to raise money. The people whose best interests are to elect Norm Siegel don't have as much money to donate as those whose best interests are in electing a far less scrupulous candidate.
Political donations, government jobs, government contracts, pension funds and investment agencies, all tied together. It is this corrupt combination that all too often determines elections and that all too often determines government policy. And my discussions with Marty Markowitz showed that he either doesn't care about or doesn't understand the problem. My discussions with supporters of Brad Lander who defended Blue Wolf in particular show that his supporters don't understand or don't care about this problem either. And yet it is at the heart of what is wrong with NYC politics.
Political contributions from companies who want politicians to advocate for their industry is common practice. Blue Wolf's top execs donate gobs of money to many politicians (their donation to Brad Lander just happened to be the one that caught my attention) and then Blue Wolf brags about using their political connections to make a buck for their investors. That is blatant conflict of interest...and often (though not always, as Cuomo's investigation may illustrate) is perfectly legal. And yet it is also, in a very real sense and even when not outright illegal, corruption. Well accepted and legalized corruption is still corruption. It means money buys influence in a pretty blatant way. And although developers are the biggest donors and expect the biggest returns on their donations, it is a problem throughout the system. Blue Wolf demonstrates that amply.
Will politicians now be giving donations from Blue Wolf back? I bet this will be one of the ways politicians will try to distance themselves from the scandal. But that doesn't change the fact that they actively and willingly participated in a pay-to-play political system that encourages this very thing. And many of them proudly defend their participation, as does Marty Markowitz right to my face, and as did some of Brad Lander's supporters right here on Daily Gotham.
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