New York's Metropolitan Transportation Authority responded angrily to an audit by state Comptroller Thomas DiNapoli that accused the transit agency of giving Apple Inc. an inside advantage for a lease for prime retail space at Grand Central Terminal.
"The comptroller's audit staff clearly has no understanding of how high-profile commercial real estate works, given the shockingly inaccurate and clearly biased audit they issued," MTA chairman Joseph Lhota said in a statement. "The MTA's lease process with Apple was open, transparent and followed both the spirit and the letter of the law."
On Monday, DiNapoli said auditors and investigators found that the MTA worked exclusively with Cupertino, Calif.-based Apple behind the scenes on a lease for more than a year before issuing a request for proposals that resulted only in a response from Apple.
DiNapoli accused the MTA of setting "a troubling precedent."
According to the audit, Apple on May 18, 2011, signed a $2 million agreement with Metrazur, the former east balcony tenant at Grand Central, for the restaurant to vacate its space five days before the MTA issued the RFP. One day layer, MTA signed an agreement with Metrazur to terminate its lease for $5 million.
On May 23, DiNapoli said, the MTA advertised the request for proposals for the Grand Central space. Among the RFP requirements, according to the audit, was $5 million as prepayment of rent to fund the Metrazur termination agreement. On the same day that the MTA publicly released its competitive RFP for bidders to apply, Apple paid Metrazur $2 million, the audit said.
DiNapoli is recommending a statutory change to increase oversight of public authority contracts exceeding $1 million. Under existing law, his office can only review contracts of more than $1 million that are non-competitive or funded. His office could not review the Apple agreement.
Lhota, meanwhile, accused DiNapoli of overt bias.
"This audit is not fact-based, and accordingly, the auditors' opinion is worthless," he said. "It's a shame the comptroller's staff who prepared this audit showed none of these qualities."
Moody's Investors Service rates the MTA Aa2. Their ratings for the state's general obligation bonds are identical.