Stringer: Rivington property flip due to poor City Hall management, not outdated processes

After reviewing 80,000 documents, the New York City comptroller’s office concluded that the controversial deed change at Rivington House, which once was required to house a nonprofit health care facility, occurred because of mismanagement – not because of an antiquated land use review protocol, as Mayor Bill de Blasio has claimed.

City Comptroller Scott Stringer told dozens of reporters Monday that the city’s processes for removing deed restrictions could be improved. But even in its current state, Stringer said the city had plenty of opportunities to prevent real estate developer Joel Landau from misleading city officials, Lower East Side residents and 1199 SEIU officials trying to protect their members’ jobs. Instead, Landau’s firm agreed to pay $16.15 million to undo the restrictions in November 2015. About three months later, he sold 45 Rivington St. to a luxury housing developer, earning a profit of about $72 million.

“When it’s suggested, ‘Well, we have these protocols that have been in place for 25 years; if we only made them better or more transparent, we could have stopped this from happening’ – that’s just not accurate,” Stringer said. “What went down here was a failure of management on multiple levels of government.”

Stringer said 40 administrative officials reviewed the Rivington House matter, including three deputy mayors, the directors of the mayor’s offices of Intergovernmental Affairs and Contract Services as well as three commissioners.

“It was pretty clear that the guy who understood government best and how to manipulate it was Landau, but look, the job of elected officials is to make sure that the bad actors don’t game the system,” Stringer said. 

Back in January 2014,  James Capalino, a lobbyist who represented the Rivington House’s long-time owner VillageCare, informed then-Deputy Mayor of Health and Human Services Lilliam Barrios-Paoli that the Department of Citywide Administrative Services had agreed to remove the deed restrictions. DCAS, however, put VillageCare’s request on hold so City Hall could study alternative uses for the property. During that time, city officials estimated the site could generate up to 276 units of supportive housing. Ultimately, First Deputy Mayor Anthony Shorris decided the city preferred 45 Rivington St. be used as a healthcare facility. This policy decision, however, was not communicated to DCAS, according to Stringer.

Meanwhile, Landau was exploring luxury uses for the land and lobbying City Hall to remove the restrictions by falsely claiming he needed them lifted to obtain financing and complete the purchase of the property, Stringer said. He went so far as to send suggested support letter templates to community figures, including Carlo Scissura and Avi Leshes, leaders at the Brooklyn Chamber of Commerce, Carl McCall, former state comptroller and chairman of the SUNY Board of Trustees and Jeremy Reichberg, a Brooklyn businessman who has been charged in an alleged bribes-for-favors scheme involving NYPD officials and is reportedly part of a federal probe into de Blasio’s fundraising activity. The comptroller’s report said there was no evidence these requested letters were actually sent to government officials.

In June 2015, the administration held a public hearing on lifting the deed restrictions, but Stringer said no public outreach was done ahead of time. As a result, Landau was the only member of the public to attend. Following the hearing, the Mayor’s Office of Contract Services signed an authorization needed to move forward with the land use move.

Meanwhile, Shorris received written memos from DCAS in May and July 2015 stating that the department was removing the deed restrictions. Despite still requiring commissioners to give him weekly memos, Shorris told the comptroller’s office he stopped consistently reading them and had informed agency leaders they needed to communicate important matters to him by phone or email.

By December 2015, Lower East Side residents had begun contacting City Hall and expressing concerns that Rivington House would be sold to a luxury condominium developer. At that point, a City Hall staff member was told the deed restrictions no longer existed, and a developer intended to transform the property into luxury apartments. Stringer said this information was shared with senior officials, but no one informed the mayor for 72 days or otherwise tried to reverse course on the changes to 45 Rivington St.

“I would urge the mayor to take a look at information flow both from City Hall to agencies, and also vice versa,” Stringer said.

De Blasio has said he was outraged by Landau’s actions, but that the outdated protocols his staff were following were to blame. The mayor said his team is working on reforms meant to ensure this does not happen again during future deed restrictions reviews.

“The report proves once again that the mayor was unaware of this transaction, that the first deputy mayor was not consulted about the conversion to luxury condos, that the developer hid his intentions from City Hall, and that this decades-old process needed reform,” de Blasio spokesman Eric Phillips said in a statement. “The mayor has announced an overhaul of the entire process to ensure that community benefit always comes first.”

A few weeks ago, the city’s Department of Investigation released a report on its probe of the Rivington House deal, which concluded the city had the opportunity to protect its interests but failed to do so. The DOI report noted Shorris forwarded an email to de Blasio that contained an after-meeting report on a gathering where Rivington was on the agenda. The mayor said he did not recall receiving this email.