Manhattan DA Probes Secret Settlement Between Port Authority, Seaport Company
By Shawn Boburg, The Record
HACKENSACK, N.J. — The Manhattan District Attorney’s Office is investigating a secret $25 million legal settlement between the Port Authority and a politically connected seaport company that excused $15 million in unpaid rent at the docks in Brooklyn and Newark and handed over $10 million of public money to cover other debts.
Prosecutors have sent the Port Authority a wide-ranging subpoena requesting information about its 2011 agreement with American Stevedoring Inc. and any related communications involving the offices of Rep. Jerrold Nadler (D-NY), New Jersey Gov. Chris Christie and New York Gov. Andrew Cuomo, according to two sources with knowledge of the subpoena.
The 2011 agreement, struck in exchange for the company agreeing to leave the Port Authority’s seaport terminals, was hashed out behind closed doors, and the negotiations were closely monitored by the offices of Nadler and Cuomo, a review of dozens of internal agency documents obtained by The Record shows. The Port Authority’s executive director at the time was Christopher Ward, who had been the chief executive at ASI before he was appointed to lead the agency in 2008 by New York Gov. David Paterson.
Even though the deal provided millions of dollars to the company, the Port Authority — which gets much of its money from tolls on the Hudson River crossings but also leases land at the region’s ports — never disclosed the pact to the public, as it does with other settlements.
The focus of the district attorney’s probe is unknown.
The bi-state agency had a lengthy, mostly bitter relationship with ASI, a port company that unloaded cargo from ships and had a history of not paying its rent. But the company and its colorful owner, Sabato “Sal” Catucci, worked hard to cultivate politicians, donating hundreds of thousands of dollars in campaign contributions over the years, including nearly $20,000 to Nadler, who has long fought to keep Brooklyn’s small, struggling seaport, a source of blue-collar jobs, running. That effort included pushing for the Port Authority to provide operating subsidies to ASI and its predecessors at the seaport.
The dispute between the Port Authority and ASI came to a boiling point in mid-2011, after ASI — already locked in a pair of legal actions against the agency over its lease — had gone nearly three years without paying rent.
To get ASI to leave Brooklyn’s Red Hook Container Terminal and put an end to the litigation, the Port Authority agreed not only to forgive the $15 million in unpaid rent — it also agreed to pay the company’s long list of debts owed to third parties. That included money ASI owed to other companies affiliated with Catucci or his family members, according to a copy of the settlement.
More than $931,000 went to a separate company owned by Catucci, who federal prosecutors have described in court papers as a mob associate — an allegation a company spokesman strongly denied. An additional $2.3 million went to a waterfront company run by Catucci’s brother, Ronald Catucci. And the Port Authority also agreed to cover ASI’s unpaid bills for utilities, insurance, city and state taxes — even $201 owed to a medical imaging company and $71 to FedEx.
At the time of the settlement, Ward’s top adviser at the agency led the negotiations and the push to get ASI off the waterfront, internal documents show, writing in one internal memo that ASI had, for two decades, survived “off of public subsidies and political pressure.”
The adviser, Drew Warshaw, noted in a memo to a Cuomo administration official that the relationship between ASI and the Port Authority “has been of particular interest to Congressman Nadler, who has been very vocal in his support of ASI.” Nadler had in the past, he wrote, worked to get ASI subsidies to cover unpaid rent.
The investigation is the latest in a series of inquiries by several law enforcement agencies amid the increasing scrutiny arising out of the George Washington Bridge lane-closure scandal. It is also one of the first signs that investigators are also looking at the Port Authority’s activities in New York.
The Manhattan District Attorney’s Office declined to comment on the subpoena, which was issued in April, or on the focus of the probe.
In a statement issued by Nadler’s office, a spokesman acknowledged the congressman’s office played “a constructive role” in the negotiations at the request of the Port Authority and ASI, attending meetings with top Port Authority officials. It said the involvement was part of a 30-year record of strong advocacy for Brooklyn’s port. Investigators had not contacted Nadler’s office, the statement said.
Spokesmen for Christie and Cuomo did not respond to requests for comment.
Ward, the former Port Authority executive director who had previously worked for ASI, defended the deal Tuesday.
“It was time to end the failed ASI model,” he said, adding that “removing ASI at a reasonable cost will allow the city to realize enormous economic benefits of a re-imagined waterfront.”
A spokesman for ASI, meanwhile, said that the deal was “unilaterally” pushed by the Port Authority to force the company out of the ports and that neither ASI nor Catucci profited from the deal.
“This was a ridiculous deal that wasted toll payers’ money and served nothing more than vindictiveness and to stand in the way of economic development,” the spokesman said.
A company official who would only speak on condition that his name was not used because of the investigation said ASI had also received a subpoena from Manhattan prosecutors for documents related to the deal.
A Port Authority spokesman said the agency had not released the $25 million agreement to the public because of litigation but declined further comment. By contrast, the agency regularly reports legal settlements for as little as a few hundred dollars on its web site.
The dispute over ASI’s lease at Brooklyn’s last remaining seaport has been marked by rancor and recriminations and colored by competing visions for prime waterfront property that could serve as either a beachhead for a blue-collar job market in Brooklyn or as an opportunity for parkland and luxury housing.
Port Authority officials argued that ASI’s business model — using Port Authority-owned barges to move cargo unloaded in Brooklyn to New Jersey — was broken. In essence, the bulk of the cargo shipped to the Brooklyn port was then shipped again to Port Newark where it was unloaded once more and placed on trains or trucks. ASI has argued in several lawsuits that its leases, last renewed in 2008, were unfair and that the Port Authority has purposefully undermined its business.
But ASI has had strong political advocates outside the Port Authority who argued for keeping the Brooklyn operation open. In a 2011 memo to Cuomo’s office, Warshaw, the top adviser to Ward, who was then Port Authority executive director, said the company had gotten its rent forgiven twice in the past — both times at the request of former New York Gov. Paterson’s office. He also estimated that ASI had gotten $64 million in public subsidies over the previous 15 years, $54 million of that to keep the Port Authority-owned barges between Brooklyn and New Jersey running.
ASI was a prolific donor during roughly the same time frame.
Between 1997 and 2011, Sal Catucci, the company’s owner; his wife, Lorraine, and ASI gave more than $315,000 to political campaigns, according to an analysis of campaign federal, state and city campaign records. The biggest amount went to the New York State Conservative Party. The Catuccis and ASI donated nearly $30,000 after 2008, around the time the company stopped paying the Port Authority rent. There were no direct donations to either Christie or Cuomo. The most recent donation to Nadler was in 2006.
But when the Port Authority approached ASI about cutting ties in June 2011, it sent a copy of the proposed settlement agreement to Nadler’s chief of staff, Amy Rutkin, according to agency emails. The initial offer by the Port Authority was $2 million. An ASI executive, Matt Yates, wrote back, in an email also copied to officials in Nadler’s and Cuomo’s offices. He called the Port Authority offer “extremely low” and asked for $104.75 million.
The memos reviewed by The Record do not show that Nadler’s office or any other public officials pushed for additional money for Catucci, although they do show aides were extensively involved. Nadler’s office got daily updates of progress in the negotiations, and before the negotiations began, Port officials sought feedback from Nadler’s office on the parameters of the deal, the records show.
The congressman’s spokesman, Aaron Keyak, said that Nadler had been a “30-year champion for the Port” and had promoted previous operators at Red Hook.
“Over this time, there arose many threats to the port and many challenges to each of its operators and Rep. Nadler has acted throughout as a staunch port advocate,” he wrote. “When the Port Authority and ASI were negotiating a settlement agreement, Rep. Nadler’s office played a constructive role — at the request of both parties — to keep the discussions ongoing in order to ensure the seamless continuation of port operations.”
The documents do show that Ward, in at least one case, directed Port Authority staff in negotiations with his former employer, ASI, although it was in an effort to rein in the offer.
“I think our offer should be ‘we will consider all your payables and provide another 500 grand,'” he wrote in an internal email on June 27, 2011 before a negotiating session. “I would not go up more than another 350 over the coming days.”
The final agreement, providing $25 million to ASI, was approved unanimously by Port Authority commissioners, including chairman and Christie appointee David Samson, in a July 2011 meeting behind closed doors. It included $400,000 cash to ASI and an additional $9.8 million to pay off the company’s accumulated debt.
According to the settlement, $931,000 went to pay American Chassis Pool Systems, a Catucci-owned company that state records show closed down at the end of 2011. The Port Authority paid $1 million that was owed to New York State and $77,000 in unpaid fees to the Waterfront Commission, which was created in the 1950s to root out organized crime on the waterfront.
And nearly $350,000 was earmarked for ASI’s attorneys at law firm Weiss & Hiller.
There were small bills, too: $770 to a heating and cooling company, $48 to the Brooklyn postmaster, $198 to UPS and $929 for an office supply store.
In the settlement, ASI and the Port Authority agreed to drop their lawsuits against each other – in the Port Authority’s case, an effort to evict the firm for not paying its rent, and in ASI’s case, a complaint alleging the Port Authority unfairly charged the company more than other port tenants.
ASI had three leases that the Port Authority officials estimated in internal documents should have brought about $5 million in annual revenue to the agency.
An ASI spokesman said the settlement was “plainly a ridiculous and bad deal all around” and claimed that the company was forced out of the port against its will. The company has filed a lawsuit against a dockworkers union — International Longshoremen’s Association — since then, alleging that it was also threatened and pressured by the longshoremen.
The ASI spokesman also disputed 2007 court documents in which federal prosecutors refer to Catucci, who has not been charged with a crime, as either an associate of the Gambino or Genovese crime families.
“ASI has a multi-decade track record of fighting organized crime, including litigation fighting the ILA (International Longshoremen’s Association), and any statements to the contrary are ridiculous,” the spokesman said.
State records show Catucci’s brother, Ronald, is a vice president at American Maritime Services Inc. Ronald Catucci, however, was also listed in campaign finance documents as ASI’s treasurer as recently as 2005.
The Port Authority agreed to give ASI $2.3 million to pay American Maritime Services for labor provided to ASI, according to the agreement.
AMS, based in Woodbridge, has had its own allegations of mob influence.
In a 2012 agreement with the Waterfront Commission, and signed by Ronald Catucci, AMS agreed to hire an independent monitor to root out corruption and mob influence in the firm, alleged to have put a known organized crime figure on the payroll. And in June, one of its workers, Francis Mangano Jr., was banned from working on the docks after an investigation by the Waterfront Commission found he had ties with the associates of the Bonanno and Colombo crime families.
Neither Catucci has ever been charged with a crime.
Meanwhile, back in Brooklyn, a new tenant, a beer distributor, took over the Red Hook facility.
But the Port Authority is still losing money. In late 2011, when it made the transition, the Port Authority estimated it would lose about $9 million in the first year under the new lease, including new subsidies to keep the Brooklyn port running.
Photo via Wikimedia Commons