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Cuomo prober finds $49 million in 'sloppy' billing on Buffalo Billion, other projects

The Manhattan attorney hired by Gov. Andrew M. Cuomo’s office to review state procedures in the aftermath of subpoenas related to the Buffalo Billion project has identified “systemic problems” in the state’s handling of $49 million in bills.

Bart M. Schwartz, chairman of Guidepost Solutions LLC, also refers to the state’s “sloppy process” while recommending that $49 million of the $417 million analyzed in money owed to vendors be withheld. The conclusions are included in a report obtained by The Buffalo News under a Freedom of Information request filed with the state comptroller.

Schwartz’s review said some billings related to the SolarCity project in South Buffalo and other upstate economic development initiatives should not be paid because they “lacked sufficient information and documentation to establish that required procedures had been followed.”

“We found systemic problems with the approval, review and inspection process for the authorization to release New York State funds,” Schwartz said.

The lawyer hired by the governor also said his recommendation for withholding the $49 million stemmed from “issues of insufficient documentation, appropriate authorization, or other issues.”

Just days after the report was given to Cuomo in April, Empire State Development Corp. President Howard A. Zemsky assured Schwartz that a number of steps were taken to address the concerns.

“ESD has taken substantive steps to strengthen applicable processes to address the concerns you have raised and to implement your recommendations, including our support of strengthened governance provided to non-profits associated with SUNY,” Zemsky wrote. “These efforts include the adoption of revised bylaws, the implementation of strengthened policies and procedures bringing greater transparency and accountability for the expenditure of funds, and bringing on new senior leadership.”

The report, initiated in 2016 and before charges were lodged against executives of LPCiminelli and other upstate firms that worked on Buffalo Billion projects, is considered significant because it outlines deficiencies in the state’s own procedures regarding the program. But it also  is considered significant that the deficiencies were uncovered in a review ordered by Cuomo himself.

“Our extensive reviews of payment and performance issues found problems with the approval, review and inspection processes for the authorization for release of New York State funds relating to the Buffalo Billion and Nano projects,” the Guidepost memorandum reported, referring also to nanotechnology projects in other parts of the state. “Frequently, required processes and procedures were not followed; required documentation was incomplete; and, review procedures were either not in place or not being followed to what we believe was the necessary level.”

The firm also issued a host of recommendations aiming to “assure transparency, reliability and integrity in the review and payment processes of the Buffalo Billion and Nano projects.”

Schwartz added that his review does not necessarily “translate into unethical or criminal behavior.”

“However, establishment and strengthening of financial and operational controls and discipline in spending the taxpayers’ money and the insistence on the delivery of required documentation and following of prescribed procedures,” he said, “eliminates the opportunity for those who have nefarious motives to take advantage of the sloppy process.”

The documents also indicate the cost of the contract with Schwartz’s Guidepost firm jumped from $500,000 to more than $1 million because of the increased services requested by the Executive Chamber.

In his letter to the governor, Schwartz said he was pleased that Cuomo’s office “has been engaged with attempting to rectify the issues we have raised.”

Only a few portions of the documents requested by The News were redacted under provisions of the Freedom of Information Law. They included disclosure of home addresses and references to the investigation still underway by the Manhattan U.S. Attorney’s Office.

Indeed, Zemsky noted that his ESD agency had recently assumed oversight of the Buffalo Billion and other projects from other state agencies. He assured Schwartz that ESD had adopted and implemented “review protocols,” continued insisting on sufficient documentation for the $49 million under scrutiny, and ensured that expenditures on the projects were consistent with legislative appropriations.

He also noted the state may yet recover some money as a result of the federal indictments, and that no state funds have been expended on any “matter of concern” related to the investigation.

Zemsky also said his agency has now received the necessary documentation on all of the $49 million in question except for $23,000.

Schwartz, a former federal prosecutor, was hired in April 2016 to review the Buffalo Billion program just hours after federal prosecutors issued a subpoena to Cuomo’s office. Albany sources at the time identified Schwartz’s duties as scrutinizing past, present and future Buffalo Billion projects.

State hires private firm to examine Buffalo Billion spending

But the federal government cast a far more serious pall over the Buffalo Billion last September when then-Manhattan U.S. Attorney Preet Bharara lodged charges of bid-rigging against eight men across the state as part of an expose of a “pay to play” culture.

The eight defendants, including Cuomo’s longtime friend Joseph Percoco and Buffalo businessman Louis Ciminelli, pleaded not guilty in Manhattan federal court to a range of corruption charges. They included bribery and extortion, all of which raised questions about the awarding of some of the Cuomo administration’s signature economic development projects in upstate, including the Buffalo Billion’s SolarCity construction contract won by LPCiminelli.

A chronology of the Buffalo Billion and the federal probe into it

The case, which includes pay-to-play allegations lodged against major donors to Cuomo’s campaign, including Ciminelli and a Syracuse-area developer, also included indictments against Dr. Alain Kaloyeros, the former president of SUNY Polytechnic Institute and the governor’s point person on several major upstate projects, including the Buffalo Billion award to LPCiminelli.

Besides Louis Ciminelli, two other LPCiminelli executives pleaded not guilty: Michael Laipple and Kevin Schuler.

A federal judge set an Oct. 30 trial date for the defendants, although others accused in the sprawling statewide corruption case could be tried separately starting in January.

Attorneys for the three Buffalo defendants – Ciminelli, Schuler and Laipple – asked that their trial be moved to Western New York. But U.S. District Judge Valerie E. Caproni delayed action on that request and is expected to rule this summer.

Defendants seek dismissal, or separate trials, in Buffalo Billion case

All eight defendants could go to trial together on Oct. 30. But if the judge splits the case in two, a second trial for the other five defendants would begin in New York on Jan. 8, Caproni said.

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