Alain Kaloyeros, longtime head of SUNY Polytechnic Institute and ally of Governor Andrew Cuomo, was arrested this morning along with several developers who were big-time donors to Cuomo, and two longtime members of Cuomo's inner circle, Todd Howe and Joseph Percoco. Kaloyeros has for years been one of (if not the) highest-paid state employee, making at least $1.17 million last year in dual roles with the college and the Research Foundation for SUNY, which channels state funding to the school. In addition to boosting nanotechnology and allegedly fixing bids for signature Cuomo development projects around the state, Kaloyeros has a taste for John Varvatos threads, Italian sportscars, and misogynistic Facebook memes.
Most pertinent today is his alleged participation in rigging the Buffalo Billions project, which dedicated $1 billion in state funds to Buffalo factories, research facilities, and other developments, and the Central New York Hub for Emerging Nano Industries, a $15 million, high-tech film studio that was supposed to bring jobs to the Syracuse area (by and large, it hasn't). The feds are charging Kaloyeros with conspiracy to commit wire fraud for allegedly helping to tailor requests for proposals in the two projects to two specific developers who were allegedly paying off Howe and Percoco, and had given hundreds of thousands of dollars to Cuomo's campaign.
The federal charge against Kaloyeros carries as many as 20 years in prison.
"I really do hope there is a trial in this case so New Yorkers can see, in gory detail, what their state government has been up to," U.S. Attorney for the Southern District of New York Preet Bharara said at a press conference this afternoon.
Kaloyeros is also being hit with three felony state anti-trust charges for similar alleged schemes related to dorm construction and other SUNY real estate arrangements, Attorney General Eric Schneiderman announced this afternoon. The charges carry 4 to 12 years in prison.
"There's a long history of public corruption in New York state, going back to the days of Alexander Hamiltion and Aaron Burr, but it feels like we are living in a golden age of graft recently," Schneiderman said at his own press conference.
Kaloyeros rose to prominence as a physicist evangelizing about the virtues of nanotechnology, and lately has been busy as an administrator of the College of Nanoscale Science and Engineering, which in 2014 merged with the SUNY Institute of Technology to become SUNY Poly, and Cuomo's point person for planning big-ticket tech-jobs projects around the state.
If the allegations are true, this last posting seems to have been a grave error on the part of Cuomo. To recap, from the federal complaint against Kaloyeros and the seven others:
Kaloyeros allegedly hired Howe as a consultant from 2012 to 2015, paying him $25,000 a month to maintain a close relationship with the Governor's Office and help carry out large projects. In 2013 and 2014, Howe was also working for Syracuse developer COR Development and Buffalo developer LPCiminelli, who wanted access to the Governor's Office and Kaloyeros. According to the complaint, COR paid Howe $14,000 a month, and LPCiminelli paid a little under $8,500 a month.
In 2013, as planning was underway for the Buffalo Billion project, Howe allegedly forwarded LPCiminelli internal SUNY Poly emails about the process, as well as emails between him and a law firm for another developer. Similarly, as the state was ramping up to put the film studio project out to bid, Howe allegedly leaked confidential details to COR.
Kaloyeros allegedly tried to convince the board of directors for Fort Schuyler Management, a company created to award state development money and headed by Kaloyeros, to see the bidding as the beginning of a "strategic partnership" rather than a one-off development project, meaning the companies selected would get no-bid contracts for future projects in the respective areas.
The build-up to the projects also coincided with a flurry of donations to Cuomo, which Howe allegedly encouraged. COR's executives and their family members gave at least $250,000 to get the governor elected, including $65,000 one month before allegedly supplying information on how to properly rig the Syracuse bid to Kaloyeros. LPCiminelli's Louis Ciminelli and family members gave at least $100,000 from 2009 to 2014, and while his Buffalo Billion bid was being considered in 2013, hosted a Cuomo fundraiser that netted the campaign $250,000.
A diagram made by federal prosecutors to show the alleged flow of money in a corruption scheme implicating state nano-tech czar Alain Kaloyeros and two members of Governor Cuomo's inner circle. (Joshua Keefe/Gothamist)
In drafting the requests for proposals, Howe allegedly reached out to the two developers for lists of specific qualifications so that he and Kaloyeros could tailor the bid requests to disqualify all other developers. As the calls for bids were drafted, he allegedly shared the companies' "vitals" with Kaloyeros, and non-public details of the plans with the developers. In one seeming smoking-gun email, upon receiving a draft request for proposals, Kaloyeros allegedly wrote, "these are not unique to LPCiminelli..we need more definite specs, like minimum X years in Y, Z number of projects in high tech, etc, etc."
In another, when Howe passed along a list of COR's qualifications to Kaloyeros's work email address, Kaloyeros responded, "Please gmail not email." (This is not a good plan for keeping one's email private.) COR general counsel Joseph Gerardi allegedly offered handwritten comments on a draft RFP, writing in one section that called for proficiency in specific software that COR used, "too telegraphed??"
The Syracuse call for bids was apparently so specific that no other developers bothered to submit proposals. COR would go on to build the $15 million film studio and, with no RFP, a $90 million factory in Syracuse. Howe allegedly received a $385,000 bonus for his efforts.
In Buffalo, the RFP called for applicants to have 50 years of experience, a provision allegedly included to cement LPCiminelli's hold on the job. Shortly after the call went out, the SUNY Research Foundation's director of procurement emailed developers to say that was an error, and the authors meant to write "15 years."
"Grrrrr," an executive at LPCiminelli allegedly wrote in an email to Ciminelli and co-defendant Kevin Schuler after receiving the "15 years" email.
"50 was a bit obnoxious," Schüler allegedly responded.
The Buffalo RFP drew three bids total, and LPCiminelli got picked to build a $225 million manufacturing plant in Buffalo. That contract later ballooned to $750 million.
In related but separate schemes, Percoco and Howe have been charged with extortion, soliciting bribes, and fraud for allegedly stringing along a company called Competitive Power Ventures by saying they would extract various regulatory favors from other state officials, in exchange for payments funneled through a shell corporation set up by Howe, as well as a $7,500 a month part-time children's education job the company allegedly created at a power plant for Percoco's unemployed wife.
Howe pleaded guilty to extortion, wire fraud, and conspiracy charges secretly this month, and is cooperating with federal prosecutors, helping them, among other things, understand why he and Percoco call each other "Herb" all the time, and refer to money as "Zitti," as in "Don't want to tip over the Zitti [sic] wagon." (Answer: It's mob lingo for money, as seen on The Sopranos.)
Joseph Percoco, left, with Governor Cuomo in 2013. (AP)
Percoco's lawyer Barry Bohrer told the New York Times the prosecution is "an overreach of classic proportions... Mr. Percoco performed services honestly and within the bounds of the law at all times."
Also charged at the state level is Joseph Nicolla of the Albany development company Columbia Development.
The three alleged schemes involving Nicolla and Kaloyeros are:
- The development of a SUNY Poly dorm in Albany, wherein Kaloyeros allegedly forwarded rival bidding information to the developer and gave him a heads up before the release of the RFP.
- The construction of a research building, wherein Kaloyeros allegedly awarded the contract to a contractor who agreed to loan $50 million to a nonprofit Kaloyeros controlled for SUNY. The influx of money to the nonprofit allegedly bumped up Kaloyeros's pay.
- The awarding of space in a SUNY Poly building to an architectural firm, which Kaloyeros allegedly allowed in exchange for work on SUNY projects, and a share of state money steered its way. Kaloyeros allegedly boasted to the firm about his ability to "write an RFP in such a way that only one company could win it."
SUNY has suspended Kaloyeros without pay, Governor Cuomo announced earlier today.
Cuomo has known and worked closely with Howe and Percoco since the 1990s, and used to be fond of talking about how his late father Mario Cuomo referred to Percoco as his "third son." He also appeared regularly with Kaloyeros throughout the past several years at events publicizing their alleged high-tech economic development projects. In a statement today, Cuomo distanced himself from all those who appear to now be going down.
"I learned this morning of the charges filed by the U.S. Attorney’s office that include a former member of my administration. If the allegations are true, I am saddened and profoundly disappointed," he said in a statement. "I hold my administration to the highest level of integrity. I have zero tolerance for abuse of the public trust from anyone. If anything, a friend should be held to an even higher standard. Like my father before me, I believe public integrity is paramount. This sort of breach, if true, should be and will be punished."
Referring to the previous successful prosecutions of former Assembly speaker Sheldon Silver and former state Senate majority leader Dean Skelos on corruption charges, Bharara said that the developers and quasi-governmental wheel-greasers involved in this case show that "the state legislature does not have any kind of monopoly on graft and corruption in New York."
Bharara declined to say whether his office had interviewed Cuomo as part of this investigation, or whether he was the subject of further inquiries.
Additional reporting by Josh Keefe