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With legal and political stakes, Buffalo Billion trial begins Monday

ALBANY – Twenty-one months after FBI agents arrested him at his home early in the morning on Fall’s first day in 2016, Louis Ciminelli, an insider’s insider of the Buffalo business and civic communities, goes on trial Monday morning in a Manhattan courtroom in a bid-rigging case with enormous legal and political implications.

The outcome of the trial, which could take more than a month to complete, will decide whether Ciminelli, along with three other now high-profile defendants, go to prison or end their role in a case that has captured supreme interest at the state Capitol.

The trial also presents Gov. Andrew M. Cuomo with potentially damaging news. In advance of the trial, he is already battling a two-front re-election bid against a fellow Democrat and a Republican who together have zeroed in on Albany corruption and pay-to-play headlines to use against Cuomo as he seeks election to a third term.

At issue is whether laws were broken in the way Ciminelli’s firm, LPCiminelli, and a Syracuse company called COR Development, were selected to build some of Cuomo’s signature upstate economic development projects, including the state’s Buffalo Billion solar plant project at RiverBend.

The case is Part II of a corruption trial that earlier this year led to the conviction of longtime Cuomo insider Joseph Percoco, who jurors decided used his Cuomo power perch to personally enrich himself with private entities having business before the state.

The Percoco trial, however, pales in comparison to the taxpayer money allegedly improperly directed in the Buffalo Billion trial. The RiverBend facility alone cost taxpayers more than $750 million for a deal prosecutors say was illegally awarded to Ciminelli, a major political donor of Cuomo.

Key players in the Buffalo Billion bid-rigging trial

Closely watched trial commences

Ciminelli led a company that performed mega projects across the state, including the multibillion dollar renovation of 48 Buffalo school buildings, a sprawling Catskills casino and major commercial, health care and government projects across Western New York. Now, he is facing a jury trial on allegations – down now to conspiracy to commit wire fraud and wire fraud after bribery charges were recently dropped – that he was a participant in a bid-rigging scheme.

Louis P. Ciminelli, left, leaves Buffalo federal court in 2016. (News file photo)

Prosecutors say his company helped write a request for a proposal that was used by the state to select what it called a “preferred developer” – awarded to LPCiminelli in January 2014 – to handle future Buffalo Billion-related projects. The award came as Ciminelli was pumping donations to Cuomo, the author of the Buffalo Billion program.

Also on trial will be Alain Kaloyeros, the former Albany-based head of the SUNY Polytechnic Institute who was tapped by Cuomo to run large economic development projects in upstate, including the deal that went to LPCiminelli. The trial starting Monday is officially called U.S. v. Kaloyeros et al.

The trial’s two Syracuse defendants are Steven Aiello and Joseph Gerardi of COR Development. Both were on trial in the Percoco bribery case; Aiello was convicted for his role in that matter, while Gerardi was acquitted.

The alleged conspiracy also involved Todd Howe, a former Washington-based lobbyist with long ties to Cuomo; Howe has already pleaded guilty for his role in the affair. Unlike the Percoco trial, prosecutors will not be calling Howe to testify against the defendants. Howe has been in a federal jail since he was arrested part-way through his testimony in the Percoco trial after seeming to admit on the witness stand that he violated the terms of his cooperation deal with prosecutors by trying to get a hotel charge inappropriately removed from his credit card bill.

Howe had deals representing both LPCiminelli and SUNY Polytechnic while LPCiminelli was working to get the state deals through a nonprofit corporation created by SUNY to help push along economic development and university projects. Critics say the arrangement, along with a law several years ago that weakened state Comptroller Thomas DiNapoli’s oversight of certain SUNY contracts, helped to create an environment where the alleged bid-rigging could occur.

The four men are accused of a conspiracy to “secretly rig the bidding process” that paved the way for LPCiminelli and Cor to get $1 billion in state-funded real estate projects. While the case does not specifically allege that big and timely donations by Ciminelli to Cuomo were part of an illegal quid pro quo scheme, prosecutors have made clear that they will be bringing those donations as evidence in order to present jurors with the full story of the scheme.

Federal prosecutor David Zhou, one of the government’s lawyers who will be handling the trial, in a recent pre-trial hearing told U.S. District Court Judge Valerie Caproni that “part of the motivation” for Ciminelli and Aiello to make donations to Cuomo “was the importance of state action to them." He said it was also “part of the motivation for rigging the bid” by Kaloyeros and Howe in favor of LPCiminelli and Cor. By the time of the Buffalo Billion RFP process, Kaloyeros had become a trusted Cuomo adviser, while Howe was a longtime political helper for Cuomo, including raising money for his campaign committee. Both men, prosecutors have suggested, were eager to please Cuomo.

The trial’s feature characters have changed from when charges were first brought. Gone as defendants are Kevin Schuler, a former top LPCiminelli executive who recently pleaded guilty for his participation in the alleged conspiracy and has been cooperating with prosecutors and will testify at the trial, as well as Michael Laipple, another ex-LPCiminelli executive who a couple weeks ago saw all charges against him suddenly dropped without explanation by prosecutors.

Also gone from the case’s cast is Preet Bharara, who was fired by President Trump as U.S. Attorney for the Southern District in Manhattan. Now running one of the Justice Department’s busiest prosecution offices is Geoffrey S. Berman. Berman is a Trump selection who, like at the Percoco trial, is expected to be popping in and out of the Buffalo Billion trial that is being spearheaded by three federal prosecutors and featured a major investigative role by the FBI’s Buffalo field office.

The defense claims

The defendants have turned to top shelf law firms from Manhattan and Albany and Buffalo. Their lawyers have defended politicians embroiled in scandals and corporate executives whose alleged crimes ranged from manslaughter and environmental crimes for polluting the Gulf of Mexico to a string of alleged financial misdeeds involving former titans from the likes of Enron to Wall Street firms.

Defense lawyers, in court filings over the past year, have made a number of claims that end up flatly denying any illegal acts were committed. For starters, they say state procurement laws do not apply to Fort Schuyler Management Corp. That’s the Albany-based nonprofit real estate entity created in 2009 to handle contracts on SUNY Polytechnic’s behalf.

In the case of Ciminelli, he is charged with being part of a conspiracy in which LPCiminelli helped include information for the RFP to bolster the chance his company would get the big contract. Defense lawyers, however, say there is no law preventing bidders from helping to prepare RFPs.

The defense team for Ciminelli has written Judge Caproni, who also presided over the Percoco case, to insist that their client did not seek to gain a competitive advantage in the RFP process. Even if he had, the wire fraud statute was not violated because there is no proof that he intended to cause “economic harm” to Fort Schuyler, lawyers have argued.

Michael C. Miller, Kaloyeros’ lawyer, noted recently that prosecutors filed a document saying that had Fort Schuyler’s board of directors not been deceived about the bidding process that “it may well have considered whether other developers would provide higher quality services or have negotiated better deals for itself." To that claim, Miller wrote, according to court documents: “ ‘May well’ is not proof; it is prosecution by speculation."

Kaloyeros was also a board member of Fort Schuyler.

Prosecutors sharply disagree, court papers show, and say the economic harm was that Fort Schuyler did not have the benefit of an un-rigged bidding process when it made the decisions to select LPCiminelli for what ended up to be a massive contract.

Defense lawyers also say the RFP’s award to Ciminelli and COR do not meet the standard of “property,” which they say is a key term in federal wire fraud laws. They note that the RFP award was only an initial step, did not guarantee a contract to build anything and that long negotiating sessions were still needed before an actual contract was awarded to the two firms for big projects in Buffalo and Syracuse.

Importantly, Paul Shechtman, Ciminelli’s lawyer argued in a recent court filing, the RiverBend facility constructed by LPCiminelli, “was built on time and on price and is of high quality."

After Schuler started cooperating with prosecutors, defense lawyers expressed optimism that the longtime Ciminelli insider will be of help to their case. On the overall issue about the quality of the work at RiverBend and LPCiminelli’s reputation, Shechtman told the judge, according to transcripts of a June 6 hearing, that Schuler will “say that LPCiminelli is the best contractor in Buffalo."

“That’s like me saying I’m the best (judge) in the Southern District," the judge responded.

“But you haven’t signed a cooperation agreement," Shechtman said. “Even if I had," the judge responded.

Despite defense lawyers’ attempts, the judge made it clear to them that they will be limited in trying to provide evidence and witnesses to talk about public benefits of the Buffalo and Syracuse projects approved by Fort Schuyler.

“The ultimate merits or public benefits of these transactions are irrelevant, and any possible relevance is outweighed by the risk of confusion and wasting the jury's time. The government's right to control theory does not depend on whether the projects were good deals or whether the projects were worthy of being financed. The question is whether the defendants' misrepresentations exposed Fort Schuyler to an ‘unexpected economic risk,’ " the judge said at the hearing.

The judge is also not allowing prosecutors to introduce evidence showing the lifestyle of Kaloyeros, who for a period of time was the state’s highest paid employee. State records from the State University of New York show that Kaloyeros in 2015, for instance, made $795,733 from the SUNY Research Foundation and $549,846 from SUNY Polytechnic. Kaloyeros’ personal cars included a Ferrari.

Alain Kaloyeros. (Shannon DeCelle/Special to The News)

Prosecutors say Kaloyeros engaged in bid-rigging partly to maintain his top position at SUNY and, therefore, his upscale lifestyle. Pleasing Cuomo was part of his drive, they have suggested, as a way for Kaloyeros to maintain his influence as a major player in the SUNY system. Kaloyeros was successful in convincing state officials to let him break off his nanotechnology empire into a wholly separate college from its former home at the University at Albany.

Miller, the former SUNY president’s lawyer, however, said Cuomo had nothing to do with setting Kaloyeros’ pay and that the former SUNY president brought in $350 million annually to SUNY in the way of grant money.

“I don’t have any problem with you introducing evidence of his desire to maintain a good relationship or to create or maintain a good relationship with the governor," Caproni told a prosecutor in the recent hearing, according to transcripts. But specific details about his salary and lifestyle are not coming into the trial, she said.

A broader impact?

In a trial indictment filed in advance of Monday’s opening statements from prosecutors and defense lawyers, the U.S. Attorney’s Office noted that LPCiminelli and COR were tapped as “preferred developers” for big projects in their areas after they “had each made sizable contributions to the governor’s re-election campaign” and had begun paying Howe, the lobbyist, “in exchange for Howe’s influence” over the selection process.

How the jury decides the case has a direct impact on the four defendants, as well as the U.S. Attorney’s Office, which during the Bharara years zeroed in on Albany corruption as a central target of its prosecutions.

For Cuomo, the trial comes at a time when he is ratcheting up his re-election efforts for a likely Democratic primary in September against activist and actress Cynthia Nixon. The Republican candidate is Marc Molinaro, the Dutchess County executive.

Both Molinaro and Nixon have been reliable reminders on the campaign trail that some of Cuomo’s top – and most expensive – economic development efforts in upstate are the subject of bid-rigging charges against someone he entrusted to run the program. They hold out the Buffalo Billion and Percoco cases as endemic of Albany’s ongoing corruption problems, which Cuomo said he would not tolerate when he took office in 2011.

Cuomo has not been personally accused of any legal wrongdoing.

Hank Sheinkopf, a longtime Democratic political consultant whose past clients have included Cuomo, said he does not believe the trial will benefit Nixon or Molinaro because neither are well-known and Cuomo has not been accused of any illegal acts.

“This will be an annoyance to the governor because his opponents can’t benefit whatsoever," Sheinkopf said.

Abbey Fashouer, Cuomo's campaign spokeswoman, said: "Despite others’ attempts to politicize, the U.S. Attorney and Judge have repeatedly said that campaign contributions were not unlawful and were not part of the alleged criminality. As the governor has said, there is zero tolerance for any violation of the public trust and if anyone is found guilty of wrongdoing, the book should be thrown at them."

But John Kaehny, executive director of Reinvent Albany, a watchdog group, said the pre-trial revelations have already painted a disturbing picture. “There’s really no good that you can say about how this happened," Kaehny said. He called awarding of such massive contracts without broader oversight a “monumental failure at governance” by the Cuomo administration.

“Either Kaloyeros was out of control and was allowed to manipulate and rig bids for a $750 million contract or, more damning, is this was corruption and there was pay-to-play and the powers that be either colluded or allowed it to happen," Kaehny said.

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