Imagine this. Four guys break into your house, and lug out as much as they can carry. But not too long after, they are caught, and you’re feeling a little better because they’re all charged with multiple crimes.
Then, a short time after, you get a registered letter from the gang’s law firm informing you that the attorneys for these losers will be forwarding to you all the billable hours incurred in the effort to defend the four derelicts that robbed you. The tone of the letter is professional and polite, and the lawyers even offer the reassurance that you shouldn’t worry, this won’t cost you more than $150,000, that is, for the first year’s work.
It’s a 360° crime, not unlike the kind that protection rackets set up in their own neighborhoods. The criminal grabs you, with one hand on your shirt and the other on your throat, and he offers an informal business contract: Pay me and I will make sure no one hurts you or your business. Coming or going, fight or flight, it doesn’t matter, you’re screwed no matter what you decide to do.
Welcome to the criminal enterprise otherwise known as the Town of Ramapo Local Development Corporation (RLDC).
Now some people, the Town Board, for instance, which set up the second part of this ugly gambit, would tell you the taxpayers have to pay the bill to defend these characters because the gang is made up of public officials, all charged in matters that involve their actions as officers of the town. And when the charges are civil (funny way to characterize it), the legal bills get delivered to the victims of their crimes.
There are tens of millions that the public now owes due to the fraudulent loans (bonds) manipulated by St. Lawrence’s crew. And we will be paying this debt going forward, and so will our children, and possibly grandchildren, because some of the loans go out 30 years, long after the time some of this group will disappear behind federal penitentiary walls. The payments, a painful reminder of their crimes, will be added to our taxes each year.
What was the money for? Look at the photo above. What Federal Prosecutor Preet Bharara is pointing to is the Provident Ball Park, and it’s labeled “Costing Taxpayers Over $50 Million.” Yes, the same ballpark that you voted against in a special referendum, thereby legally prohibiting the Town from floating bonds to pay for it. The one St. Lawrence said, “Would not cost the taxpayers a single dollar.” You might recall the bobble-head Town Board nodding dissent in the background.)
A list of the specific charges appear at the end of this posting, and you can read there who did what according to the SEC.
Rounding the circle
To return to how the legal bills got stuffed in our mailboxes, here’s the timeline:
April 14, 2016, the SEC files its complaint against the Town of Ramapo, the RLDC, and the four individuals of the gang.
December 14, 2016, the Ramapo Town Board votes to have the legal fees to defend the four, the Town, and the RLDC in the SEC case paid by the good citizens of Ramapo. The same taxpayers who told all of them in a referendum vote, “We’re not going to pay for your ballpark.” Nevertheless, Yitzchok Ullman, Brendel Logan Charles, and Michael Rossman, members of the BobbleBoard, added the defense fees to the millions already spent on the Supervisor’s sports palace. Here’s what they voted to do:
So, with a smirk, St. Lawrence and his co-conspirators said, “Please make out your checks to the Receiver of Taxes—that’s Nathan Oberman, who, by the way, has been indicted with the rest of us. Thank you for your support.”
But there are some legal questions not yet answered.
New York State created the Local Development Corporation law without much forethought. Consequently, across the state, not just here in Ramapo, LDCs have become a haven for ethically challenged politicians. There are currently 279 known LDCs operating in New York State, and the OSC (Office of the State Comptroller) is not allowed to audit these sometimes renegade corporations. In the words of the Comptroller Thomas DiNapoli, “In many instances, these entities are used to avoid constitutional or statutory provisions that would apply to projects undertaken directly by a local government (e.g., prohibition on gifts to private entities, referendum requirements, competitive bidding, and limitations on the issuance of debt.)” Here in Ramapo, the RLDC formed by Christopher St. Lawrence has run afoul of both the SEC and the Justice Dept. on a variety of matters, which has our Supervisor currently staring at a possible 40-year prison term, fines, and sanctions.
Even though Comptroller DiNapoli cannot audit the RLDC, his office can audit the Town of Ramapo’s records, and in February 2012, he exposed the illegalities and incompetence of the Supervisor, the attorneys, and the Town Board. From that audit, we learn:
(NYS Comptrollers Audit of Ramapo February 2012):
“Town officials have inappropriately mingled the activities of the Town and the Ramapo Local Development Corporation (RLDC) in the construction of a minor league baseball stadium. These actions allowed Town officials to circumvent laws the Town is required to abide by for the approval and construction of such projects, and has resulted in the Town paying over $35.4 million in improvement costs and being liable for at least $25 million in bonds issued for debt on property that the Town no longer owns. In addition, there is little likelihood that the project will generate sufficient revenue to help the Town pay for this outstanding liability.”
(So, Ramapo and its officials circumvented laws and have offloaded millions in debt on the taxpayers for property owned by the RLDC.)
“The Town will pay approximately $27.5 million1 in principal and interest payments on these bonds over the next five years. This is significantly more than the approximately $7 million a feasibility consultant projected the baseball stadium would generate in net revenues available for debt service during the same time frame. The Town does not have a written agreement with the RLDC outlining how the RLDC will reimburse the Town for the principal and interest on these bonds. Supposedly, the RLDC is relying on revenues that will be generated from the sale of affordable housing units (the Elm Street Project) to reimburse the Town. However, the RLDC obtained loans of approximately $29.9 million that were also guaranteed by the Town to build these units. These loans must be repaid before any revenues generated from the sale of the units can be made available to reimburse the Town for payments related to the $25 million bonds. As a result, it is unlikely that the RLDC will be able to reimburse the Town for the full principal and interest payments made on the $25 million bonds.”
(Taxpayers have to repay loans made by the RLDC, even though the laws governing LDCs require that there is no mixing of Town and LDC funds.)
“We [the auditors] found that the Board has not exercised effective oversight of the Town. Board members told us that they received no financial reports, such as detailed project cost reports for Town projects (including the baseball stadium), budget versus actual reports, and generally did not receive or review contracts. Additionally, Board members told us that they did not know how much the baseball stadium would cost the taxpayers or how it would be paid for.” Malpractice or malfeasance on their part? What do you think?
To sum up: There has been a circumventing of the law, and our feckless Town Board has thrown up its hands declaring, “Who knew?”
The SEC charges are civil charges, but the evidence shows there are felonies here. And although the taxpayers can be put on the hook for defending public figures against civil charges that’s not true of criminal charges.
The FBI and DOJ
Not only did the Comptroller lift the lid on the stink generated within St. Lawrence’s RLDC, the FBI decided to order a field trip back in May of 2013.
From The NewYork Daily News description: “About 40 FBI agents swarmed a typically quiet suburban town hall in Ramapo, N.Y. Wednesday. The agents wheeled out boxes brimming with paper documents and hard drives in yet another crackdown on alleged corruption in Rockland County.
The agents arrived around 3:30 p.m., asked the staff to leave and refused to discuss the investigation, a town official confirmed.
Locals suspect that some of the sought-after files concern the Ramapo Local Development Corporation (LDC) and the controversial $38 million baseball stadium it runs. The Rockland Boulders’ Provident Bank Park could wind up costing taxpayers as much as $60 million, the New York State Comptroller warned.”
This was followed by a long investigative period culminating in arrests very early in the morning of April 14, 2016. Federal agents showed up at St. Lawrence’s home and hauled him away in handcuffs to be arraigned on felony criminal charges. These included 22 counts of federal securities fraud, wire fraud, and conspiracy. Two individuals were charged that day in White Plains: the CEO of the RLDC, St. Lawrence, and the Executive Director of the RLDC, Aron Troodler, also a Ramapo Town Attorney. Unlike the other set of charges brought by the SEC, these are felony counts that carry with them serious prison sentences. And unlike the civil charges, the legal expenses for these defenses are not supposed to be offloaded on to the taxpayers.
It looks like the alleged criminal behavior of the four indicted officials is a hybrid mix of criminal and civil charges, which invites the question: Will the creation of a defensive strategy and tactics for the civil charges cross over into the criminal case brought against two of the principals charged—St. Lawrence and Troodler? And should the victims of the crime, ripped off in the DOJ’s assessment for possibly $60 million, should they be getting these bills?
You might be tempted to go to a Town Board meeting and directly ask St. Lawrence, or Michael Klein, or Nathan Oberman about this, but I can guarantee you, they won’t answer any questions. They won’t do anything that might jeopardize the defenses currently being drafted for them for which you are paying. And the Town Board? As long as the wheels haven’t completely come off the car, they’ll just keep nodding on the rear window. It’s what they do.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23521 / April 14, 201
Securities and Exchange Commission v. Town of Ramapo, et al.
Civil Action No. 16-cv-2779 (S.D.N.Y., filed April 14, 2016)
SEC: Town Officials in New York Hid Financial Troubles From Bond Investors
The Securities and Exchange Commission today announced fraud charges against Ramapo, N.Y., its local development corporation, and four town officials who allegedly hid a deteriorating financial situation from their municipal bond investors.
The SEC alleges that Ramapo officials resorted to fraud to hide the strain in the town’s finances caused by the approximately $60 million cost to build a baseball stadium as well as the town’s declining sales and property tax revenues. They cooked the books of the town’s primary operating fund to falsely depict positive balances between $1.4 million and $4.2 million during a six-year period when the town had actually accumulated fund balance deficits as high as nearly $14 million. And because the stadium bonds issued by the Ramapo Local Development Corp. (RLDC) were guaranteed by the town, certain officials also masked an operating revenue shortfall at the RLDC and investors were unaware the town would likely need to subsidize those bond payments and further deplete its general fund.
According to the SEC’s complaint, inflated general fund balances were used in offering materials for 16 municipal bond offerings by Ramapo or the RLDC to investors, who consider the condition of a municipality’s general fund when making investment decisions. After town supervisor Christopher P. St. Lawrence purposely misled a credit rating agency about the town’s general fund balance before certain bonds were rated, he told other town officials to refinance the short-term debt as fast as possible because “we’re going to have to all be magicians” to realize the purported financial results.
According to the SEC’s complaint:
- Christopher P. St. Lawrence, who served as RLDC’s president in addition to being town supervisor, masterminded the scheme to artificially inflate the balance of the general fund in financial statements for fiscal years 2009 to 2014.
- St. Lawrence and Aaron Troodler, a former RLDC executive director and assistant town attorney, concealed from investors that RLDC’s operating revenues were insufficient to cover debt service on bonds to finance the stadium.
- Town attorney Michael Klein helped conceal outstanding liabilities related to the baseball stadium and repeatedly misled the town’s auditors about the collection of a $3.08 million receivable recorded in the town’s general fund for the sale of a 13.7-acre parcel of land to the RLDC. But because the title of the property was never transferred from the town to the RLDC, Klein also made misleading statements about the receivable’s source.
- Troodler helped conceal the fictitious sale and boost the account balance of the town’s general fund by approving RLDC financial statements reflecting a purchase of property that never actually occurred. Troodler also signed offering documents that contained an additional fabricated receivable totaling $3.66 million for another transfer of land from the town to the RLDC. The only land transferred from the town to the RLDC during the time of the purported transaction was property donated for the baseball stadium, which St. Lawrence and Troodler knew did not impose any payment obligation on the RLDC.
- The town’s deputy finance director Nathan Oberman participated in activities to inflate the town’s general fund by arranging $12.4 million in improper transfers from an ambulance fund to bolster the troubled general fund during a six-year period.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against St. Lawrence and Troodler.
Read the full text of the Release here. https://www.sec.gov/litigation/litreleases/2016/lr23521.htm
By-Laws of the Ramapo Local Development Corporation
P24c “The Corporation at all times shall pay any employee, consultant or agent of the Corporation, or any other operating expense incurred by the C orporation from the assets of the Corporation; and
P25j “other than expressly provided herein, pay all expenses, indebtedness and other obligations incurred by it;