A $1 billion economic development initiative in Buffalo, N.Y. is at the center of a corruption scheme that federal prosecutors say resulted in hundreds of millions of dollars being awarded for New York State contracts.
Preet Bharara, U.S. Attorney for the Southern District of New York, announced Thursday afternoon that Joseph Percoco, a former executive deputy secretary under Gov. Andrew Cuomo, and seven other defendants were charged with corruption and fraud charges related to contracts awarded for upstate economic development projects. The charges follow an investigation launched into Cuomo's $1 billion "Buffalo Billion" program aimed at revitalizing New York State's second largest city.
"Pervasive corruption and fraud allegedly infected signature state development projects like the Buffalo Billion program," Bharara said in a statement. "The bids allegedly were rigged, the results preordained; companies got rich and the public got bamboozled."
Also charged Thursday were Alain Kaloyeros, president of the State University of New York (SUNY) Polytechnic Institute in Albany and executives for developers based in Buffalo and Syracuse.
Cuomo announced a $1 billion commitment to the Buffalo area over a 10-year period in 2012 designed to spur greater private investment. The program has involved dedicating $226 million in state funding toward a $1.7 billion public-private partnership to convert a vacant manufacturing site into a state-of-the art hub campus for high-tech and green energy businesses.
Prosecutors cited two schemes they uncovered in their investigation including one that involved the awarding of contracts in the Buffalo Billion initiative. Authorities said Kaloyeros and longtime Cuomo adviser Todd Howe received bribes in exchange for secretly rigging bids to ensure the awarding of contracts for Buffalo projects to two developers.
The other scheme announced by Bharara accuses Percoco with soliciting and accepting more than $315,000 in bribes from executives at two companies in exchange for taking official state action to benefit the firms. Email correspondence between Percoco and Howe referred to the bribe payments as "ziti", which prosecutors say is a reference to a term for money used by characters on the former hit HBO television show "The Sopranos."
Bharara said Howe has pleaded guilty to conspiracy charges. Percoco's attorney Barry Bohrer said his client will plead not guilty and describes the prosecution as "an overreach of classic proportions."
Cuomo issued a statement following the charges saying if allegations are true he is "saddened and profoundly disappointed." He said SUNY has relieved Kaloyeros from his duties and has suspended him without pay, effective immediately.
"This matter is now in the hands of the court, which is exactly where it belongs," said Cuomo. "My administration will continue to be fully cooperative in the matter as we have been since it began."
Buffalo officials have touted the Buffalo Billion program with helping the city reinvent itself with a high-tech economy after nearly averting bankruptcy in 2003. Moody's Investors Service rates Buffalo bonds at A1, which is up five notches from the near junk-level Baa3 rating it was assigned from June 2003 to February 2007.
The press office for Buffalo Mayor Byron Brown did not return a call for comment on how Thursday's charges may impact the city.
