Arrests and Criminal Charges in Bribery Schemes Involving DOB and HPD

Mayor Bill de Blasio is serious about adding more affordable housing in the city. The New York Times and other news outlets have reported that the mayor wants to see 240,000 new units, including 80,000 affordable housing units, completed by 2024. But an increase in demand also opens the door for those ready to cut corners and make some easy money.

"Bribery schemes compromised two important city agencies and fair competition in our robust housing and real estate development markets," said Manhattan District Attorney Cyrus R. Vance Jr. "Today’s cases demonstrate that the same surging demand that drives the pace of development can inspire the taking of shortcuts, and the taking of bribes. Working proactively with our partners at DOI and the NYPD, we are routing out corruption at all levels, and bringing those who abuse their positions of power to justice."

The defendants are charged in 26 New York State Supreme Court indictments filed in New York and Kings Counties with crimes including bribery, bribe receiving, falsifying business records, tampering with public records, and official misconduct. Click here to see the list of defendants and the charges, which were first reported by The Daily News, being brought against them.

"Our investigation revealed a widespread network of corruption in the construction industry and among the city workers charged with keeping that industry safe," said DOI Commissioner Mark G. Peters. "We found that these 16 city employees, including several senior supervisory staff, took bribes to clear code violations including some that presented real safety threats."

According to court documents and statements made on the record in court, over the course of several years, eleven DOB employees, ranging in roles from clerks to chiefs, allegedly accepted bribes in Manhattan and Brooklyn in excess of $400,000.

These DOB employees are charged with accepting monetary payments ranging from $200 to $3,000, and other benefits from property managers and expeditors (filing representatives registered by the DOB to act as middlemen between the department and contractors, homeowners, and managing agents).

In exchange, the DOB employees allegedly cleared complaints, Stop Work Orders, and violations, and expedited DOB inspections, enabling expeditors to bypass proper channels and deal directly with high-level DOB employees.

This latest round of arrests may have well been fueled by the demand for new housing, but it's hardly a new trend. On June 15, 1994, then Manhattan District Attorney Robert Morgenthau announced the indictment of 82 managing agents and four firms in a kickback investigation.

“In every case, the crime essentially was the same: managers exploited the trust placed in them by their co-op clients and betrayed that trust by accepting kickbacks from contractors and suppliers,” said Morgenthau at a 1994 press conference. “The cost of these kickbacks, of course, was passed along by the vendors to the shareholders, thereby raising the cost of living in [the affected] buildings as much as 10 percent.”

In 1999, after months of rumors, it happened again. Morgenthau announced indictments of property managers, vendors, architects, board members, and superintendents. He outlined a system in which many vendors systematically kicked back a percentage of the job’s cost to either a manager, board director, architect, or sometimes all of them for a shot at doing business with a co-op or condo. He also found evidence of bid-rigging.

This is all pretty scary stuff, and serves as a cautionary tale for co-op and condo boards and the importance of employing a system of checks and balances among its members and the professionals with whom they do business, including accountants, attorneys, and property managers. 

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