Bidding Process Corrupted for NYC Casino

MANHATTAN (CN) - State lawmakers ran a "political free-for-all," with help from lobbyists, to select a vendor for New York City's first casino, according to a report released Thursday by the state's Inspector General. Though accepting campaign contributions from potential vendors was illegal, the three frontrunners in the deal, and their associates, gave more than $100,000 to elected officials during the bidding process, according to the 300-page report.

Aqueduct Entertainment Group was chosen to run video slot machines at Aqueduct Racetrack in Queens, but it won the multi-billion dollar contract after elected officials competed for more than $100,000 in campaign donations, according to the report.

Then-Gov. Eliot Spitzer created the process in 2008, allowing the governor, Senate majority leader and Assembly speaker to pick Aqueduct's slot-machine vendor - without lobbying restrictions to keep the decision-makers honest, according to Inspector General Joseph Fisch's report.

"This process was doomed from the start, and at each turn our state leaders abdicated their public duty, failed to impose ethical restraints and focused on political gain at a cost of millions to New Yorkers," Fisch said in a statement.

"Unfortunately, and shamefully, consideration of what was in the public's best interest, rather than the political interest of the decision makers, was a matter of militant indifference to them."

The OIG report claims that Gov. David Paterson, Senate Democratic Conference Leader John Sampson, Senate President Pro Tempore Malcolm Smith and Assembly Speaker Sheldon Silver all had a hand in scheme.

The Inspector General's Office says it began investigating within days of the Jan. 29, 2010, selection of AEG, and says Silver asked the office to review the entire bid process.

Paterson dissolved the deal in February amid "public outcry," and Genting New York was selected in August through a "streamlined process" run by state lottery, according to the OIG report.

"The public outcry was prompted by news that Governor Paterson sought political backing from an AEG partner, the Reverend Floyd Flake, three days after AEG's selection," the OIG report states. "In addition, AEG offered the state $100 million less than other bidders. The inspector general determined that the governor's meeting with Flake was ill-advised but found no evidence of a quid pro quo."

The report says that Silver did not actively participate in the selection process or veto the selection, though he allegedly had reservations about choosing AEG as the vendor.

Instead, the speaker created a "poison pill" to delay the selection, at taxpayers' expense, by imposing post hoc conditions, according to the report.

The report recommends that New York eliminate the selection process, and create more restrictive measures "on all major contracts to ensure that they are competitive, transparent and fair."

The report found that the state budget director and lottery division warned Gov. Paterson that AEG was shaky financially, because it relied heavily on debt and had significant licensing issues, but the governor's office ignored the lottery division's attempt to organize the process.

Paterson's counsel, Peter Kiernan, never passed on the warning against AEG to the governor, so Paterson did not know about the agency's concerns when he signed off on the selection, according to the report.

Paterson's assistant, David Johnson, who advocated for the deal, refused to testify before the Inspector General under his Fifth Amendment right.

Secretary to the Governor Lawrence Schwartz claimed during his testimony that he did not remember why he ignored official vetting data.

State Senate officials also gave AEG an unfair advantage by leaking their bid analyses to the company's lobbyists, according to the report.

The Office of the Inspector General claims that an assistant to Secretary to the Senate Angelo Aponte sent an email to an AEG lobbyist, attaching an internal memo detailing and analyzing all six competing bids.

Sampson provided an AEG lobbyist with inside information and attended a February 2010 "victory party" with Smith and state Senator Eric Adams, chairman of the Racing and Wagering Committee, before AEG's selection was official, according to the report.

Though accepting campaign contributions from potential vendors was illegal, the Office of Inspector General found that the three frontrunners and their associates gave more than $100,000 to elected officials during the bidding process.

Smith claimed to have recused himself from the selection process because he had a personal relationship with Flake, an AEG partner, but a paper trail shows that he continued to advocate for AEG and was kept in the loop by other officials, according to the report.

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