Thursday, March 10, 2011

US v. Kruger: The Complaint (UPDATED)

Kruger, Carl et al Complaint

Right before last night's show, news broke of Federal corruption charges coming down on State Senator Carl Kruger. Don't just rely on the mainstream media sources out there - he's the actual Federal Complaint. I'm going to read it and (hopefully) have some expert legal analysis to share with you all later tonight.


Manhattan U.S. Attorney Announces Federal Corruption Charges Against Two Members of the New York State Legislature
Six Others Charged in Bribery Schemes, Including Albany Lobbyist, Two Hospital CEOs, Health Care Consultant, and Real Estate Developer
U.S. Attorney’s Office March 10, 2011

PREET BHARARA, United States Attorney for the Southern District of New York, and JANICE K. FEDARCYK, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (“FBI“), announced today the unsealing of a complaint charging New York State Senator CARL KRUGER and State Assemblyman WILLIAM BOYLAND, JR., with accepting bribes in exchange for official acts. KRUGER is charged with taking more than $1 million in bribes from, among others, lobbyist RICHARD LIPSKY, real estate developer AARON MALINSKY, and health care consultant SOLOMON KALISH, all of whom are also charged. DAVID ROSEN, the CEO of the MediSys Health Network, is also charged with conspiring to bribe KRUGER, as well as with paying over $177,000 in bribes to New York State Assemblyman WILLIAM BOYLAND, JR., and $390,000 in bribes to former New York State Assemblyman Anthony Seminerio, in exchange for their official acts. ROBERT AQUINO, the former CEO of Parkway Hospital in Queens, New York, is also charged with bribing KRUGER. MICHAEL TURANO, a Manhattan-based gynecologist, is charged with laundering KRUGER’s bribes through two shell companies TURANO established for the benefit of himself, KRUGER, and others. Each of the eight defendants voluntarily surrendered this morning. They are expected to be presented in Manhattan federal court later today.

Manhattan U.S. Attorney PREET BHARARA said: “Today’s complaint filed in Manhattan federal court describes a broad-based bribery racket reflecting an unholy alliance of politicians, lobbyists, and businessmen. Every single time we arrest a state senator or assemblyman, it should be a jarring wake-up call. Instead, it seems that no matter how many times the alarm goes off, Albany just hits the snooze button. Maybe this time they will get the message.”

FBI Assistant Director in Charge JANICE K. FEDARCYK said: “The complaint lays out a roadmap of bribery, money laundering, influence-peddling, and official misconduct that is eye-opening even to seasoned investigators. The web of graft and corruption, of buying and selling influence, is not what representative democracy is supposed to look like. The FBI remains committed to rooting out official corruption wherever it exists.”

According to the complaint unsealed today in Manhattan federal court:

The Alleged KRUGER Bribery Conspiracy

CARL KRUGER has served as a member of the New York state senate since 1994, representing Bergen Beach, Flatlands, Mill Basin, and other communities in the 27th Senate District. From at least 2006 through March 2011, KRUGER received a stream of bribes totaling at least $1 million in exchange for taking official actions on behalf of the bribe payers as opportunities arose. Rather than receive these corrupt payments directly, KRUGER funneled them to the bank accounts of two shell companies established by MICHAEL TURANO—Olympian Strategic Development Corp. (“Olympian”) and Bassett Brokerage (“Bassett”). KRUGER had an intimate relationship with the TURANO family. He acted and was treated in many ways like a member of the family. Among other things, KRUGER spent his free time with the Turanos, shared holidays with them, went shopping for them, and managed the affairs of their residence. Of all the TURANOS, KRUGER was closest with MICHAEL TURANO. The two men were in nearly daily contact, KRUGER picked TURANO up from work, and people even called KRUGER’s cellphone in order to reach TURANO. MICHAEL TURANO used the money deposited in Olympian and Bassett to pay the lease on a Bentley automobile, pay his credit card bills, and pay off the mortgage on the multi-million-dollar home that he shared with his mother and brother.

As alleged in the complaint, between 2006 and 2011, KRUGER received a stream of bribes from, among others: (1) RICHARD LIPSKY, a lobbyist and the principal of Richard Lipsky Associates, Inc.; (2) AARON MALINSKY, the principal of P/A Associates LLC, a real estate development firm; and (3) SOLOMON KALISH, the owner and operator of Adex Management, Inc. (“Adex”), a marketing/consulting firm that brokered relationships in the health care industry.

LIPSKY directed approximately $252,000 of his lobbying fees to the Olympian account in exchange for which KRUGER took official actions to benefit LIPSKY’s clients. His actions included sponsoring and supporting legislation, lobbying other elected officials, and directing state monies for the benefit of LIPSKY and his clients. For example, KRUGER supported the award of millions of dollars in state funds to certain development projects that were being undertaken by a key client of LIPSKY’s. He even wrote a letter to a judge on behalf of one of LIPSKY’s clients.

MALINSKY, through P/A Associates, caused a stream of payments to be made to Olympian totaling approximately $472,500. In exchange for these payments, KRUGER took official action to benefit MALINSKY’s interest in a certain real estate development project in Brooklyn, including taking positions at a public hearing in favor of that project.

Through Adex, KALISH directed approximately $197,000 to Olympian in exchange for KRUGER’s taking official action. For example, as alleged in the Complaint, in the summer of 2008, ROBERT AQUINO, then the CEO of Parkway Hospital, paid Adex approximately $60,000—half of which KALISH then directed to the Olympian bank account—so that KRUGER would lobby New York state officials in connection with Parkway Hospital’s efforts to acquire certain other hospitals, namely the Caritas Hospitals. In 2008, DAVID ROSEN similarly attempted to bribe KRUGER in connection with efforts by MediSys to acquire the same hospitals. To that end, ROSEN caused Brookdale Hospital to hire a certain third party hospice care provider, knowing that KRUGER had an interest in it. That interest was manifested by an arrangement with Adex pursuant to which Adex was paid for helping to secure business for the hospice care provider. The contractual negotiation between Brookdale Hospital and the hospice care provider appears to have been terminated, however, when Anthony Seminerio was arrested.

The Alleged ROSEN Bribery Conspiracy

According to the complaint, KRUGER was one of three elected officials that DAVID ROSEN sought to bribe. In addition to KRUGER, ROSEN also is alleged to have made or caused corrupt payments to Anthony Seminerio and WILLIAM BOYLAND, JR. Specifically, between 1999 and 2008, ROSEN caused MediSys or its affiliates to make approximately $390,000 in payments to Seminerio through a sham consulting company, Marc Consultants, that Seminerio had established. In exchange for receiving these payments, Seminerio advocated with New York State agencies concerning the discharge of a $19,000,000 loan in 2006, co-sponsored legislation to provide a secured financing option to MediSys in 2006, and, like KRUGER, deliberated with state agency personnel on behalf of Medisys in connection with the acquisition of the Caritas Hospitals. Because of these acts, Seminerio was indicted, pled guilty to one count of honest services fraud, and was sentenced to six years in prison. Seminerio passed away while his case was on direct appeal and the cause of action against him was abated.

ROSEN also caused MediSys to make corrupt payments to BOYLAND. As alleged in the complaint, ROSEN caused BOYLAND to be hired for what amounted to a no-show consulting job that paid BOYLAND approximately $35,000 a year between 2003 and 2008. In exchange for the approximately $177,000 that BOYLAND received from MediSys, BOYLAND took official action to benefit MediSys, including requesting that the Speaker of the Assembly award millions of dollars to Brookdale Hospital, a member of the MediSys health network.* * *

Mr. BHARARA praised the investigative work of the FBI.

This prosecution is being handled by the Office’s Public Corruption Unit. Senior Trial Counsel GLEN G. McGORTY and Assistant U.S. Attorneys WILLIAM HARRINGTON, MICHAEL BOSWORTH, and KAN NAWADAY are in charge of the prosecution.

The charges contained in the complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.


Statement of FBI Assistant Director in Charge Janice Fedarcyk at Press Conference on Public Corruption

This morning, eight men were placed in FBI custody after a long-term investigation into public corruption. Two state legislators, a lobbyist, a real estate developer, and two hospital executives are among the defendants.

FBI Assistant Director Janice Fedarcyk

The criminal complaint outlined by the U.S. Attorney lays out a roadmap of bribery, money laundering, influence-peddling, and official misconduct that is eye-opening even to seasoned investigators and prosecutors.

Carl Kruger has been a New York state senator representing Brooklyn since 1994. For at least the last five years, while he nominally represented the people of the 27th Senate District, Kruger took official action aimed at furthering the interests of a much smaller circle of people.

Kruger sponsored or supported legislation, lobbied other officials, or directed state funds for the benefit of businesses whose officers or advocates lined Kruger’s pockets, directly or indirectly, with more than $1 million.

Kruger attempted to conceal the bribe payments by having them funneled into bank accounts for shell companies established by defendant Michael Turano, a person described in the complaint as a particularly close personal friend of Kruger.

In fact, the complaint says, “Kruger acted like a member of the Turano family,” and “is closest with Michael Turano.” Bribe payments funneled into the accounts of Olympian Strategic Development and Bassett Brokerage were funds Kruger had direct access to.

Assemblyman William Boyland, Jr. has represented the 55th Assembly District since 2003. He had been—and remained after his election—on the payroll of MediSys Health Network.

In return for official action seeking millions of dollars in state funding for MediSys hospitals, Boyland was paid a “salary” as a “consultant” to MediSys. Witnesses interviewed by the FBI established that Boyland’s consultancy position was really a no-show job for which MediSys CEO David Rosen paid Boyland nearly $180,000.

Rosen is also charged with bribes to Kruger through a scheme involving the steering of Brookdale Hospital business to a hospice care provider in which Kruger had an economic interest. Rosen sought to have Kruger take official action in support of MediSys efforts to acquire certain hospitals.

In connection with this scheme, the hospice company paid Adex Management (and thereby Kalish and Kruger) $5,000 a month. Each month, before the money was due, Kalish would routinely call the person at the hospice company who sent the checks and say, “Carl wants to know where the money is.”

In this instance, Kruger took bribes from competing parties, because at around the same time, Robert Aquino paid $60,000 to Adex, half of which Kalish funneled to Kruger through Olympian. This money was to induce Kruger to take action on behalf of Aquino and Parkway Hospital to acquire the same hospitals MediSys wanted to acquire.

In addition to the payments to Boyland and Kruger, Rosen had also paid $390,000 in bribes to now-deceased long-time Assemblyman Anthony Seminerio. In return, Seminerio took official actions favorable to MediSys.

The Rosen-Seminerio quid pro quo resulted in Seminerio’s indictment, plea, and six-year prison sentence. Now Rosen must answer for his end of the illicit bargain—and for the Boyland and Kruger schemes.

Kruger didn’t confine his bought-and-paid-for advocacy to the hospital arena. Lobbyist Richard Lipsky paid bribes to Kruger on behalf of lobbying clients that included a major real estate developer, beverage distributors, and a supermarket retailer.

In return for bribes, Kruger took official action in the interests of Lipsky’s clients. For example:

  • Kruger introduced legislation to delay the start date of the law that required bottle deposits on bottled water.
  • Kruger issued a statement in support of a law to permit liquor stores to extend hours of operation.
  • Kruger opposed the opening of a retail superstore in Brooklyn, which was also opposed by a coalition of small-store retailers that hired Lipsky.

Real estate developer Aaron Malinsky paid bribes to Kruger by funneling nearly half-a-million dollars to Olympian. In return, Kruger took actions in support of Malinsky and his company, P/A Associates, including in connection with a commercial retail center in Mill Basin, Brooklyn.

The complaint is filled with factual detail we are only summarizing here. Those details do not paint a pretty picture. The web of graft and corruption, of buying and selling influence, is not what representative democracy is supposed to look like.

We remain committed to rooting out official corruption wherever it exists.

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