November 3, 2009
It’s ironic that I should be noting this tale on November 3rd, Election Day 2009, in New York City, as the richest man in town, “Independent” Michael Bloomberg is running on his private budget, due to surpass $100 million against Democrat Bill Thompson with his six million budget. Bloomberg’s cumulative self-funding for the three terms was upwards of $250 million. The last term violated the two-term limit twice voted on by New Yorkers. New Yorkers were denied a vote on the third term and instead the City Council’s arm was twisting to pass it in a hurry-up vote.
As importantly, during his eight years as Mayor, Boss Bloomberg’s private fortune has gone from $5 billion to over $16 billion dollars, an increase of $11 billion in a time that included the biggest economic decline since the Great Depression. What could be behind this spike in wealth, even as Bloomberg touts his claim that he takes only a dollar a year as Mayor? Methinks a lot more has been acquired through the porous walls between the Mayor’s office, Bloomberg L.P., (88% Bloomberg-owned) “a Google-like search-company” for financial data, and involvements in private deals.
Bloomberg’s first company, Innovative Market Systems, began in 1981, after he was fired from Salomon Brothers as a general partner and head of equity trading. Yet he received a generous $10 million parting package used for his start-up, a financial software services company. He received an immediate investment of $30 million in cash from Merrill Lynch. In 1987, Bloomberg L.P was founded while the Merrill association has continued to this day. Bloomberg L.P. has expanded its reach of electronic terminals from 5,000 to 250,000 around the world, now carrying Bloomberg News as well. The Mayor can tap into company emails and financial data from his City hall desk’s computer.
Curiously, Bloomberg’s deputy mayor, Daniel L. Doctoroff from 2001 to 2007, was made President of Bloomberg, L.P. in 2008. Wiki reports, “As deputy mayor, he was responsible for Economic Development and Rebuilding, Dan oversaw more than 40 City agencies, offices and corporations, including the Departments of Buildings, Transportation, Environmental Protection, Information Technology and Telecommunications, City Planning, Finance, Small Business Services, Housing Preservation and Development, the Economic Development Corporation, and the Mayor’s offices of Operations and Long-term Planning and Sustainability. Deputy Mayor Doctoroff was responsible for 289 separate projects and initiatives, including the Mayor’s PlaNYC agenda, which made New York a global leader in sustainability. He has also served as the Administration’s point person on the rebuilding of Lower Manhattan after the devastation of 9/11.”
It’s interesting to note that “Before joining the Bloomberg administration, Doctoroff was Managing Partner of Oak Hill Capital Partners, a private equity investment firm. During his fourteen-year association with Oak Hill, Doctoroff was actively involved in the acquisition and management of many companies, including those in the media, financial services and information services sectors. While at Oak Hill, during 1994, Doctoroff founded NYC2012, the not-for-profit corporation created to organize New York City’s bid for the 2012 Olympics. He was recruited into the Bloomberg administration in late 2001.” The media savvy is key to Bloomberg’s operation.
“Doctoroff previously worked as an investment banker at the former Lehman Brothers. Mr. Doctoroff received a B.A. degree from Harvard College in 1980. He received a J.D. degree from the University of Chicago Law School in 1984. Before attending law school, Doctoroff was a political pollster.”
So, the Mayor had kind of a mirror image of himself as deputy, as they sat several feet away from each other in Bloomberg’s “bull-pen,” an open office modeled after a trader’s office. Doctoroff also took a dollar year for the job. In fact, Bloomberg mentions it at the end of his glowing recommendation for his deputy…
"As the chief architect of our five-borough economic development plan, Dan Doctoroff has done more to change the face of this City than anyone since Robert Moses. As a result of Dan’s efforts, we’ve allowed for the creation of 130 million square feet of commercial and residential space, three new sports arenas, a new subway line, 2,400 acres of parks, the regeneration of more than 60 miles of waterfront, all while displacing only 400 residents. The initiatives Dan has spearheaded and the strong leadership he provided daily to the City’s business and financial communities were essential to the strong and unexpectedly fast economic recovery we made after the destruction of 9/11.
“His efforts were instrumental in helping us create more than a hundred thousand jobs and a climate where businesses wanted to locate and people wanted to work. His impact will be felt for decades to come….For the past six years I have sat eight feet away from Dan and have seen the countless daily demonstrations of his extraordinary vision, creativity, energy and his ability to attract and motivate talented staff, and achieve goals that no one thought possible. I have asked Dan to continue to oversee some of the City’s most critical projects during a transition period in 2008, and I’m delighted that Dan will bring his exceptional leadership qualities to Bloomberg L.P.. At $1 per year, for six years, the $6 we have paid Dan makes his service to New York perhaps on of the greatest bargains for the City since the purchase of Manhattan for $24."
One wonders if Dan as Mike have more than made up for their investments.
For answers, I turn now to the veteran New York City government watcher, Journalist Wayne Barrett, writing on September 1, 2009 in the Village Voice, Bloomberg Keeps His Billions Separate From His Mayoral Obligations? Yeah, Right! This is a must read. Space allows me to only highlight some of the more egregious Bloomberg deals Barrett’s research team revealed. He writes…
“…After nearly two full terms, however, the walls between the mayor’s money and his public office that once looked so strict have appeared more and more porous. In some cases, like with Time Warner, that may not have been Bloomberg’s doing. And in others, it may not have even been what was on his mind. But as he nears a third term, there’s little doubt that Bloomberg’s business interests have become increasingly intertwined with his government, a conflicted marriage unprecedented in the life of the city and unchecked by an independent overseer.
“One of the rules Bloomberg agreed to was that he would keep his hands off "all matters involving cable television. While Bloomberg has backed wholesale deregulation and higher rates for cable, saying that carriers ‘don’t make a lot of money,’ there is, in fact, no evidence that Bloomberg has ever personally intervened in the decisions about the three national companies that have contracts with the city. But it’s clear that his network did benefit, mightily, from Time Warner’s channel change.
“It’s also true that television is increasingly important to Bloomberg LP’s long-term business plan. Until Bloomberg’s most trusted aide, Deputy Mayor Dan Doctoroff, announced his departure from city employment, he had overseen the city’s cable franchises (his designated successor, Ron Lieber, does that now). Doctoroff left the city to become president of Bloomberg LP, where he has made the revamping of the television operation a top priority…
“Two months after Doctoroff was installed as Bloomberg LP’s president in January 2008, the Time Warner channel switch happened.
“There’s no way to tell if Bloomberg TV’s move from channel 104 to channel 30 on New York’s dial has improved the network’s ratings, since Nielsen doesn’t release them. But cable experts say that the move was certainly designed to enhance the network’s advertising potential in Manhattan, where the people who make ad-buying decisions are much more likely to notice the station now than when it was in triple digits. Meanwhile, in the rest of the country, Bloomberg TV remains in the cable hinterlands: It’s still at 224 in Los Angeles, 252 in San Diego, 246 in Boston, and, like it once was in New York, 104 in New Jersey. (Cablevision, which has the city contract in the Bronx and parts of Brooklyn, has Bloomberg TV at 105.)”
To make it perfectly clear, Channel 30 was originally the YES Channel, which also was the broadcaster of Yankees’ home games. Bumping YES to channel 52 (far from ESPN and other sports carriers), and inserting Bloomberg TV into channel 30, the Yankees former spot, is the real issue here. As Barrett points out, Bloomberg had promised to keep his hands off of cable TV. Somehow, the dreary Bloomberg TV filled with talking heads spouting financial news and data seems strange in this new placement. But so it goes.
Barrett goes on to say that “Beyond Time Warner and Bloomberg TV, there’s one other party affected by the switch: the YES Network, which is partially owned by the Yankees. The Yankees, of course, may owe more to Bloomberg and Doctoroff than any other company in New York. Not only did the city dump public money into the new stadium, but the administration has been accused of illegally adjusting land appraisals to justify additional public bonds for it.
“Did the Yankees or YES do Bloomberg a favor with the channel switch?
Yankees and YES officials say they did not like moving up the dial. Time Warner spokeswoman Harriet Novet says the company had ‘made that change together with the YES Network’ under the terms of its ‘contractual agreement.’ A former Time Warner executive confirmed that, by contract, YES would have to be consulted before it could be moved away from the Mets channel, SNY (in something known as a ‘proximity clause).
“Ray Hopkins, YES’s chief operating officer, says that his network ‘didn’t realize who was coming in’ until after the cable company informed him that the switch was being made. But after repeatedly being asked if YES had the right to refuse the move, he declined to answer until finally saying, ‘Going down this path is dangerous for me’ because of confidentiality rules associated with the contract.
“Howard Rubenstein, the powerful publicist who represents Bloomberg LP, YES, and the Yankees, says, ‘The Yankees had no idea about the switch until the matter was concluded.’”
"’It was handled strictly by YES,’ he adds, but he would not address YES’s acquiescence to the change other than to say that ‘YES didn’t want to pay for lower channel placement,’ which suggests that it had the option of staying on channel 30 at a higher fee.
“A Bloomberg LP spokeswoman says the company requested the switch and paid Time Warner for it, but she declined to provide any details or offer examples of elsewhere in the country where it had achieved a similar change in its dial position.”
Barrett goes on to say “Everything Mike Bloomberg does—his three campaigns, his hundreds of millions a year in charity, even his public career—springs from his global company, Bloomberg LP, which has been called the Google of financial data. It does $6.2 billion of business a year and usually earns a 30 percent profit. He owns a hoggish 85 to 92 percent of it (depending on whom you believe).
“Bloomberg planned his first mayoral campaign from his corporate offices. He began thinking about running as early as 1997, and eventually assigned the management of this uncertain enterprise to three of his aides at Bloomberg LP who would all eventually become deputy mayors: Patti Harris, Kevin Sheekey, and, to a lesser degree, Ed Skyler. This synergy was infectious: The company created a news division to cover the city at the same time that its owner started actively planning his first race.
“Bloomberg’s three executive assistants—Allison Jaffin, Irene Pistorino, and Karen Greene—came with him to city government from the company and the campaign. All of them now receive both a full-time public and part-time private salary in an unusual arrangement approved by city ethics officials, working for him on personal and corporate matters for up to 30 hours a week.”
And so it went. But let me skip ahead and include perhaps Bloomberg’s most egregious offense. Barrett writes (the bold-face lead in his…)
“The city’s rules sanitizing the management of the mayor’s plentiful assets, variously estimated at between $16 billion and $20 billion, were approved by the only watchdog explicitly charged under the city charter with inspecting the crossed hairs in this thicket, the Conflict of Interests Board (COIB). Bloomberg appoints all five of its members (itals mine).The agency described its own weaknesses in a March 2009 report, noting that New York ‘appears to be the only large municipality in the United States that has granted its ethics board the power to sanction violations, but not the power to investigate such violations.’ The same internal document points out that the COIB ‘regulates the very people who set its budget,’ meaning that ‘the Board invariably has before it matters involving high-level officials at the same time those officials are passing on the Board’s budget, an unseemly situation.’
‘If the board was viewed as toothless before Bloomberg’s terms, its advisory opinions, when confronted with the myriad of cases involving this mayor, have raised questions about the health of its gums as well. When Bloomberg took office in 2002, the COIB, consisting of two holdover Rudy Giuliani appointees and a new chair installed by Bloomberg (a fourth member had to recuse himself because he was a lawyer for Bloomberg LP and the fifth seat was vacant), issued a comprehensive 16-page decision about the mayor’s potential conflicts. It forced him to release a list of LP’s 100 biggest clients, but the list was alphabetical instead of in ranked order, and the board concluded that the mere release of the names made "the risk" that he could use his position to benefit the customers ‘minimal.’
“The opinion—negotiated for months with city and Bloomberg LP lawyers—then picked a number out of a hat, saying that a customer would have ‘to constitute 10 percent or more of Bloomberg LP total sales’ to trigger any conflict concerns and force the mayor ‘to seek further advice’ from the COIB. Since this requirement remains in place today when revenues exceed $6 billion, a customer could do more than half a billion dollars’ worth of business with Bloomberg LP and still walk into the mayor’s office to get a land use or contract approval without tripping an alarm. Discussions with COIB staff turned up no rationales for the 10 percent threshold, and the opinion allows Bloomberg to police this vast and potentially troublesome terrain himself.” If that’s not enough, Barrett adds..
“In 2002, Bloomberg told the COIB that the largest customer on the list accounted for less than 4 percent of total revenue, but no one knows how much that might have changed since then. (When the board got a fresher list of the top 100, still unranked, in December 2007, it says it mistakenly forgot to post it.) Bloomberg LP customers like Goldman Sachs, Bear Stearns, AIG, Citigroup, Credit Suisse, Deutsche Bank, HSBC Bank, J.P. Morgan Chase, Lehman Brothers, Bank of New York, Tullett & Tokyo, Morgan Stanley, GFI, State Street Bank, and Merrill Lynch have all hired lobbyists to lobby the Bloomberg administration, with several specifying the mayor’s office. Of the 124 companies on one or both of the Bloomberg LP lists, 33 appear on the Campaign Finance Board’s list of companies doing business with the city.” Does that make any New York voter warm and comfy?
“Citigroup, which was the only other office tenant in the Bloomberg LP headquarters building and is now subleasing its vacated space to Bloomberg LP, even lobbied City Hall—and Doctoroff, in particular—on behalf of the Alternative Investments Group, the very unit located in the Lexington Avenue tower. Goldman Sachs had so many issues before the administration that it took seven pages to list its lobbying activities in the city clerk system (it spent almost a million dollars). When the city and state approved $1.6 billion in low-cost, tax-exempt bonds for Goldman’s new downtown headquarters in 2005, Doctoroff justified it by saying that Wall Street‘s top firm might otherwise leave the city. Last year, the Daily News editorialized that Bloomberg was ‘taken to the cleaners’ in the Goldman deal. The city and state ‘are in line to forfeit a whopping $321 million to Goldman because the governor and mayor agreed to contract terms that were downright foolhardy.’ Because of the meager demands of the COIB opinion, no one knows how big a Bloomberg customer Goldman was when it won this largesse…” And how large a goof it was.
This elimination of regulation obviously led Bloomberg to do what he pleased, and he has, in the landscape of New York City, whether it was making deals for Yankee and Mets stadiums, or even trying to block a tenants’ bid on the 80-acre, 100-building, middle-income oasis called Stuyvesant Town. Its owner was the mega insurance company, Met Life. Barrett writes…
“In the fall of 2006, amid a speculative frenzy that has since consumed world markets, the biggest real estate deal in history occurred on the East Side of Manhattan. MetLife sold… Stuy Town to a developer friend of the mayor’s, Jerry Speyer, for $5.4 billion, a price tag at least three times the rent roll paid by the 25,000 people who lived in the 11,200-unit complex, the borough’s largest. Anyone who could count knew the numbers would only work if Speyer could rapidly empty many of the 8,000 rent-regulated apartments and greatly increase prices, a result so predictable that tenants began filing lawsuits against Speyer as soon as he took over. Four appellate judges ruled unanimously this March in the tenants’ favor in one key case, Roberts v. Tishman Speyer, which will be heard by the Court of Appeals in mid-September.
“The mayor, mesmerized as ever by private deals involving 10 digits, called Speyer ‘a great landlord’ and said, less than prophetically, ‘I think the tenants will be well-protected.’ Dan Garodnick, the understated City Councilman who lives in and represents Stuy Town, said last week that Speyer has ‘moved against people in 1,500 apartments and been forced to drop half the cases.’
“At the time of the sale, Garodnick got every major Democrat in the city and state at the time—including Chuck Schumer, Hillary Clinton, Christine Quinn, and Bill Thompson—to raise alarms about the sale’s inevitable detrimental impact on the city’s affordable housing stock and even to join him in championing a $4.5 billion bid put together by tenant and union leaders.
“Bloomberg appealed to fans of the free market. ‘MetLife owns it, and they have a right to sell it,’ he declared before the sale occurred. ‘When you have a lot of people wanting to live there, prices go up’ was another Bloomberg pre-sale explanation. ‘You always feel sorry for those who can’t afford it,’ he mused on his radio show. ‘But those who can afford it say, ‘Well, what about me?’ The Daily News called Bloomberg’s comments an ‘endorsement’ of the sale, and the Times later noted that ‘the Bloomberg administration supported Tishman Speyer‘s record-breaking purchase.’” This is the self-appointed protector of the middle class speaking.
“But Bloomberg wasn’t just in favor of the sale. In fact, he and Doctoroff undercut efforts by others in the administration to come up with a proposal to save Stuy Town’s affordable apartments. Emily Youssouf, the president of the city’s Housing Development Corporation (HDC), said in August 2006, when MetLife formally put the project out to bid, that her organization could ‘use its reserves to make a loan to a buyer that would enable them, in turn, to offer the apartments to current residents at prices they could afford.’ Youssouf told the Times that MetLife ‘built the properties with the help of the city’ and could ‘get the same price’ from a city-assisted deal.’’”
The bottom line and calamity is that Speyer and friends got caught in the credit crunch in financing Stuy. Second, they lost their case to raise rents unfairly to market prices. Net net, Speyer et al now remain in default, with the future of this venerable building complex for middle-income families swinging in the wind. Thanks Mr. Mike. And this is the man with the 12-point lead in today’s election. No wonder he’s spent so much money to win.
Bloomberg should be aptly renamed the Wall Street Mayor. He works with all the clever evasions of law and regulation, the gut disdain for the poor and working classes, the sun-tanned, carefully worked-on Mr. Nice smile to cover up what’s going under his neatly trimmed hair: trouble. He is the wolf in sheep’s clothing. If you need more information to make up your mind, read the rest of the article and Wayne Barrett’s newest at the Village Voice online: A Bloomberg Score Card: The Mayor’s Hits and Misses. Barrett even grants Bloomberg the largesse of some successes. One just needs to decide if the ounces of good outweigh the ton of bad. Myself, I’m going out to vote for Thompson.