The Buffalo Billion fraud and bribery scheme: corruption and pay-to-play, a symbol of everything they’re doing

Commentary by Marita Noon

When New York’s Democrat Governor Andrew Cuomo gushed over SolarCity’s new solar panel factory in Buffalo, New York, the audience likely didn’t grasp the recently-revealed meaning of his words: “It is such a metaphor – a symbol of everything we’re doing.”

The 1.2 million square foot building, being built by the state of New York on the site of a former steel plant, is looking more and more like another political promise of help for one of the poorest cities in the state that ends up enriching cronies without ever achieving any potential for the people.

Yes, it is a symbol of everything they’re doing.

Previously, during her first senatorial bid, Hillary Clinton also promised jobs to the economically depressed region of the state of New York – 200,000 to be exact. Citing a report from the Washington Post, CBSNews states: “Jobs data show that job growth stagnated in Upstate New York during her eight years in office, the report said, and manufacturing jobs dropped by nearly a quarter.” The Post’s extensive story reveals that jobs never materialized – despite “initial glowing headlines.” It claims: “Clinton’s self-styled role as economic promoter” actually “involved loyal campaign contributors who also supported the Clinton Foundation.” Through federal grants and legislation, she helped steer money to programs, companies, and initiatives that benefitted the donors but failed to reverse the economic decline of the region.

Now, new corruption charges reveal the same pay-to-play model linked to Cuomo’s upstate “Buffalo Billion” economic revitalization plan – and the promised jobs also look they will never materialize.

Back on January 5, 2012, Cuomo announced a $1 billion five-year economic development pledge for Buffalo.  It was to be the governor’s banner economic initiative with the SolarCity factory as the cornerstone and a pledge of 1,460 direct factory jobs. Other companies, including IBM and a Japanese clean-energy company were also lined up.

With the state-of-the-art solar panel factory ready for equipment to be installed, the wisdom of the entire program is being scrutinized – and is coming up short.

First, on September 22, two of Cuomo’s closest aides – along with several others – were charged in corruption and fraud cases involving state contracts worth hundreds of millions of dollars. Addressing the press at his Manhattan office, U.S. Attorney Preet Bharara asserted: “that ‘pervasive corruption and fraud’ infested one of the governor’s signature economic development programs. Companies got rich, and the public got bamboozled,” reports The Observer. Bharara described the bid-rigging and bribery arrangement: “Behind the scenes they were cynically rigging the whole process so that the contracts would go to handpicked ‘friends of the administration’ – ‘friends’ being a euphemism for large donors. Through rigged bids, state contracts worth billions of dollars in public development monies, meant to revitalize and renew upstate New York, were instead just another way to corruptly award cronies who were willing to pay to play.”

The 79-page criminal complaint notes that campaign contributions to Cuomo poured in from people connected to the bribe-paying companies as soon as those businesses began pursuing state projects.

One of the companies that received the lucrative contracts was LPCiminelli – run by “Cuomo mega-donor” Louis Ciminelli. He allegedly offered bribes to Cuomo confidante Todd Howe – who has admitted to pocketing hundreds of thousands of dollars from developers to rig bids on multimillion-dollar state contracts linked to Buffalo Billion projects.

Ciminelli received the $750 million contract to build the SolarCity plant. The Buffalo News cites Bharara as saying: “the state’s bidding process for the factory being built for SolarCity at RiverBend in South Buffalo turned into a ‘criminal’ enterprise that favored LPCiminelli, where company executives were given inside information about how the deal was to be awarded.”

Part of Cuomo’s deal with SolarCity – in which the state owns the building and equipment with SolarCity leasing it under a 10-year deal – requires the company to meet a timetable of job-creation quotas or pay hefty penalties. Even before the building was complete, however, the company slashed its job commitment from 1460 to 500. According to the Investigative Post, SolarCity claims it will still employ the original number, but due to automation, the majority of them will not be at the Buffalo plant. With the state’s $750 million investment, that works out to $1.5 million per manufacturing job. In a press release, Cuomo promised 1460 “direct manufacturing jobs at the new facility.”

Even the 500 jobs will only materialize if the plant actually starts production – currently slated for June 2017. SolarCity’s future is, as Crain’s New York Business puts it: “uncertain.”

Amid the company’s myriad problems are the facts that it has never been profitable, nor does it have manufacturing experience.

In February 2014, SolarCity’s stock price peaked at about $85 a share. Today, a share is less than $20. Microaxis gives it a probability of bankruptcy score of 48 percent. Crains reports that it posted a $251 million loss in Q1 2016 and a loss of $230 million in Q2. To “stop the bleeding,” Elon Musk (a donor to both the Obama and Clinton campaigns and the Clinton Foundation), who owns more than 20 percent of the company, announced that Tesla (of which he also owns more than 20 percent) would purchase SolarCity – this after as many as 15 other potential buyers and investors looked at the company and decided to pass. SolarCity even considered selling the solar panel manufacturing business.

Both SolarCity and Tesla are, according to the Buffalo News, facing a “cash bind” – this despite receiving billions in federal and state grants and tax credits as I’ve previously addressed. Tesla is described as “cash-eating electric vehicle and battery making businesses.” For SolarCity, its model – which finances its solar panel installations in order to make a profit on a lease that can be as long as 30 years, while it collects the lucrative government incentives worth billions (a practice for which Solar City is currently under Congressional investigation) – requires constantly raising new money from investors. Once the Tesla deal was announced, SolarCity’s lenders started to pull back.

The Buffalo News reports: “Stock in SolarCity…now trades for $4 a share less, or 19 percent less, than what Tesla is offering – a gap indicating that investors are uncertain the deal will be completed.” Additionally, the deal is being challenged by four separate lawsuits – which could delay the deal. Addressing the merger, one analyst said: “We see a lot more that can go wrong than can go right.”

Then there is the manufacturing angle. Originally, the Buffalo plant was going to manufacture high-efficacy solar panel modules developed by Silevo – a company SolarCity bought in 2014. Crain’s reports that it will instead produce complete solar roofs: something it says “Dow Chemical recently abandoned after five years because it could not find a way to make a profit on the technology.” But then, the Buffalo News says: “The initial production in Buffalo is expected to include photovoltaic cells that SolarCity purchases from suppliers and are used in the products that will be assembled in the South Park Avenue factory.”

Whatever the plant builds or manufactures, getting it operating will be expensive – even with the New York taxpayers owning the building and equipment – and will drain scarce cash from SolarCity at a time when its financing costs have increased.

Buffalo residents wonder if they’ll be stuck with the world’s largest empty warehouse and without the promised jobs.

No wonder the entire project is in doubt. Because of the Cuomo administration corruption allegations, other proposed job-creators, including IBM, have pulled out until the probe is completed.

For now, Cuomo is not a part of the criminal complaint – though his name is mentioned many times – and he claims he knew nothing about it, nor does he think he’s a target of the ongoing federal probe. “It is almost inconceivable the governor didn’t know what was going on,” Doug Muzzio, a professor of public affairs at Baruch College, said. “And if he didn’t know what was going on, you can argue he should have known.”

Bharara has suggested that the better name for the program would be: “The Buffalo Billion Fraud and Bribery Scheme.”

Yep, the Buffalo Billion project is a “symbol” of the political promises and crony corruption – “everything we’re doing” – that takes taxpayers dollars to reward political donors and then walks away when the jobs don’t materialize.

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc., and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy – which expands on the content of her weekly column. Follow her @EnergyRabbit.

The ‘pay-to-play’ report hits the streets

Back when Change Maryland released the first teaser for this pay-to-play report sent out to media outlets today, I guessed that the release would precede the official announcement of Larry Hogan’s intentions by a couple days, in order to extend the news cycle surrounding hie entry into the race. But instead it came out today, just two days before the beginning of the General Assembly session and nowhere near Hogan’s yet-to-be-scheduled formal announcement.

And honestly, aside from the documentation of what Change Maryland terms a “deliberate, coordinated effort by this administration to to circumvent the intent of the law” and the influence it bought, the 15-page report on “alleged unethical relationships” begs the question: what can we do about it? Their lone attempt to address the situation notes:

Job creators looking to establish their business in the mid-Atlantic region want a stable and predictable business climate. They want to conduct their business without the heavy hand of politicians shaking them down for hundreds of thousands in ethically questionable political donations.

For the sake of transparency and good governance, we believe these allegations seriously warrant further investigation.

All this is correct as far as it goes, but probably the earliest we could have some sort of formal investigation would be 2015, after O’Malley is safely out of office – and only if a Republican wins the governorship. Even then, the cacophany of “this is just old news, nothing to see here, let’s just move forward” will be shrill coming from the current majority party.

On the other hand, I will say I got a little more direction from Hogan’s remarks accompanying the release of the document.

Our research reveals a disturbing pattern from this administration that is at the very least unethical and inappropriate. The people of Maryland deserve to know the truth about these donations and the state decisions that may have been influenced. Did the Governor solicit large contributions to help further his national aspirations and reward those donors with huge state contracts and favorable decisions?

Allowing a ‘pay-to-play’ culture of corruption to take a stronghold in our state government threatens every business and individual in Maryland. Even the perception of this practice prevents an honest and fair bidding process for all job creators who may wish to contract with the state. It allows complicit politicians to hijack millions, and even billions in taxpayer dollars that could serve a greater purpose, both in the government and in the wallets of struggling Maryland families.

Unfortunately, this culture of corruption is enabled when you have a political monopoly with no checks and balances. For almost eight years, this administration has run amuck without any accountability, and it’s Maryland’s working families who have paid the price. This is just the tip of the iceberg – we believe these allegations seriously warrant further investigation. (Emphasis mine.)

Hey, now there’s something to sink our teeth into! It seems some other party used the “culture of corruption” mantra to take over Congress after 12 years of minority status, so why can’t Republicans try and chip into 150 years of being on the losing side in this state? It can’t hurt.

The trick will be explaining just how this affects the average Marylander who knows instinctively that the state’s machine politics is rife with decay and corruption, but feels powerless to affect it. I’m just one vote, he may say.

That’s not necessarily true, though. When I get e-mail from the 9-12 Delaware Patriots, it ends with the tagline “you are not just one, you are one more.” If Change Maryland really has 73,000 activists who are clamoring for an end to the pay-to-play mentality in this state, the issue will be there for 2014. It will be up to candidate Larry Hogan to show leadership in the direction he wants to take us.

It’s far past time to clean up the state and end the Maryland culture of corruption.

More pay to play, the Martin O’Malley way

Damn, I can’t wait for this report to come out. Almost makes me wish Larry Hogan would drop this governor’s business and focus on getting more of this information out because too many will dismiss it as partisan opposition research:

Change Maryland has released new information that seems to reveal the appearance of a “pay-to-play” system within the O’Malley-Brown Administration where contractors received significant benefits from the state either before or after their donations to the Democratic Governors Association during Governor O’Malley’s tenure as its chairman.

“This additional data further suggests a disturbing pattern of behavior that, at the very least, is unethical and inappropriate,” said Larry Hogan, Chairman of Change Maryland. “I think the public has a right to know the truth about these practices. Did the governor and/or others in his administration solicit large contributions from contractors, then reciprocate by rewarding those donors with huge state contracts, contract extensions, or other special favors or decisions in return?” he added.

Obviously this has serious implications and gives the appearance of the potential for decisions being influenced by millions of dollars in “donations.” Recognizing the inappropriate and unethical nature of these relationships, state law currently prohibits state contractors from making contributions to an elected official’s campaign account. This evidence indicates the possibility of a deliberate, coordinated effort by this administration to circumvent the intent of the law by soliciting huge, unlimited contributions to a federal, rather than state, account.

The report released today by Change Maryland shows that healthcare services company Express Scripts received a $2.3 billion contract despite serious concerns about the company’s legal issues in Maryland and 28 other states. In 2008, the company paid over $9.3 billion in settlement costs to these states.

From March 2011 to February 2012, the Maryland Board of Public Works was deciding whether to approve the lucrative contract to Express Scripts to provide prescription drug services to state employees. In March 2011, two of the three members voted to postpone a decision out of concerns about the company’s legal issues and several flaws in the procurement process. Governor O’Malley was the lone vote to move forward with the contract.

During this same time, Medco – a company looking to merge with Express Scripts – donated a combined $225,000 to the DGA. In fact, their first contribution came just six days after Governor O’Malley cast the lone vote to move forward with the drug contract.

In late January 2012, the Board of Public Works again voted to delay the contract award, drawing significant criticism from Governor O’Malley at the time who complained about the endless delays. One month later, the BPW reversed course, awarding the contract to Express Scripts in a two to one vote. On March 27, 2012, Medco made their second and final donation to the DGA: $125,000. Medco and Express Scripts received final Federal Trade Commission (FTC) approval for their merger on April 2, 2012.

“Maryland’s working families deserve better from their elected leaders,” Hogan said. “This is what happens when you have an arrogant monopoly that feels they can get away with anything. What Maryland desperately needs is a healthy and competitive two party system, open and honest debate, and some real checks and balances to keep some of these outrageous abuses from taking place.”

In addition to this most recent research, Change Maryland released other questionable contributions from state contractors to the DGA.

Update: I was informed by a representative of Express Scripts that the correct settlement figure is $9.8 million (not billion.) This is incorrect in the original Change Maryland release, so I left the release as is and opted to clarify here.

Hogan’s group seems to be taking the Chinese water torture approach, leaking information on this report a drop at a time to both make the opposition wonder what else he’s got and keep up interest in the runup to the release.

This series seems to leave me torn as well. I’m an advocate for unfettered political contributions, even at the risk of these apparent pay-to-play contributions. But I also want full and relatively instant disclosure, and even though these are federal releases with a more aggressive reporting schedule than state accounts – at least in non-election years – there’s still a significant lag time involved.

The allegations also raise another embarrassing question: where was the state’s major media in reporting this? Didn’t anyone wonder why the vote changed? Certainly Comptroller Peter Franchot had his reasons for maintaining his vote against the issue; the vote which changed was treasurer Nancy Kopp – interesting, because hers is not an elected post. (The transcript of that meeting is painful to read because the state really seemed to drop the ball on a $2.3 billion contract, dropping a Maryland-based provider for the aforementioned Express Scripts.)

What I’m afraid of is that this Change Maryland report will be both the tip of the iceberg and dismissed as “old news” because Martin O’Malley isn’t running for anything in Maryland and Anthony Brown will escape culpability because Larry Hogan is now a political opponent instead of an honest broker.

We need to clean out the swamp, it’s true, but in order to clean it we have to secure the tools to do so first. I think it would also be a good idea for Change Maryland to reveal where it gets its funding, just to show leadership. That’s my two cents.

  • I haven't. Have you?
  • Categories

  • Archives

  • Link to Maryland Democratic Party

    In the interest of being fair and balanced, I provide this service to readers. But before you click on the picture below, just remember their message:

  • Part of the Politics in Stereo network.