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Former N.Y. Senator Espada Took Clinics’ Funds, Jury Told

Pedro Espada Jr., the former New York state Senate Democratic majority leader, and his son stole more than $500,000 from nonprofit health-care clinics they run, a prosecutor said at the end of their trial.

“The evidence in this case has shown that the defendants used Soundview as their ATM,” Assistant U.S. Attorney Todd Kaminsky said yesterday in his closing argument in federal court in Brooklyn, New York.

Espada, 58, and Pedro Gautier Espada, 38, abused their positions at Soundview Healthcare Center in the Bronx section of New York City, which gets more than $1 million a year in federal funding, according to prosecutors in the office of U.S. Attorney Loretta Lynch. Pedro Espada started Soundview in 1978.

The Espadas, who continue to run Soundview, were charged in December 2010 when the elder Espada was still in the Senate. He had been defeated that September in the Democratic primary for his Bronx seat. The Espadas engaged in several illegal schemes from January 2005 to February 2010, prosecutors said.

U.S. District Judge Frederic Block is presiding over the trial, which began March 14.

‘Disregarded the Trust’

“The defendants have completely disregarded the trust that was placed in them by the patients and doctors of Soundview, and the American taxpayers,” Kaminsky told jurors.

Much of the Espadas’ alleged illegal activity centered on two for-profit janitorial-services companies Pedro Espada founded: Community Expansion Development Corp., or CEDC, in 1980, and Soundview Management Enterprises, in 2007. Both provided services to the clinics. In January 2005, Espada transferred ownership of CEDC to Soundview Healthcare, the government said.

Soundview Healthcare was CEDC’s only customer, Kaminsky said.

Even after Soundview Healthcare owned CEDC, the Espadas operated it as if it was still theirs, using it to pay personal expenses, including for political campaigns, prosecutors allege. That scheme totaled $175,000, they said.

Extended Family

Maria Cruz, who was Espada’s executive assistant and who left the company in 2011 after 30 years there, testified that the senator put 10 members of his extended family on its payroll and seven on its board.

Kaminsky said Espada claimed in federal filings that no relatives were connected to Soundview Healthcare, which wasn’t true. Espada’s uncle was the chairman of the board, the prosecutor said.

Another assistant, Norma Ortiz, who retired after 23 years there, testified that Espada had Soundview Healthcare pay a $1,976 tab for his wife’s birthday party in April 2008 at the Harbor Restaurant on City Island, east of the Bronx mainland. He also had the company pay for his wife’s birthday gifts, including $523 for a spa treatment, $344 for balloons and $76 for 13 peach-colored roses, Kaminsky said.

The prosecutor said Espada claimed the SpaFinder Inc. gift was “a staff gift certificate,” which he called “a whopping, jaw-dropping, flat-out lie.”

Kaminsky said Soundview Healthcare paid $20,000, including a $109 mini-bar bill, for an Espada family trip to Puerto Rico, when Cruz and Ortiz testified that the company struggled to pay for medical supplies.

‘Hitting the Mini-Bar’

“This is money meant for poor people to get charity and they’re hitting the mini-bar every day,” he said.

In her closing argument today, Susan Necheles, one of Pedro Espada’s lawyers, said Soundview Healthcare was short money because the government wasn’t reimbursing it “the millions and millions of dollars” it owed for treating patients under Medicaid and Medicare.

“How dare they say it’s Mr. Espada’s fault when it’s the government’s fault?” she said. “The government wants you to believe that Soundview’s difficulties in paying its bills are all Mr. Espada’s fault.”

In 2006, Pedro Espada tried to use a $49,000 CEDC check as down payment for a $125,000 Bentley, according to the indictment. He never got the car because his financing application was rejected.

Necheles said the Bentley was an example of the prosecution delving into irrelevant matters.

“He never even bought the Bentley,” Necheles said.

Personal Meals

Pedro Espada charged more than $100,000 for personal meals on Soundview Healthcare’s corporate American Express card, including more than $20,000 at Toyo Sushi in Mamaroneck, New York, prosecutors said. He also failed to identify more than $115,000 in charges on Soundview Healthcare’s credit card as his own, they said.

“We have $103,090 of food purchases, none of which are marked personal,” Kaminsky told jurors.

The Espadas took about $200,000 by renting Soundview Healthcare conference rooms and other facilities to medical professionals and religious groups and keeping the money for themselves, according to the indictment.

The Espadas are being tried on embezzlement and conspiracy charges. One count for conspiracy to defraud the federal government involves corporate income taxes owed by CEDC and personal income taxes owed by the Espadas. Each substantive count carries a maximum sentence of 10 years’ imprisonment. The conspiracy counts bring as many as five years each.

Dismissed Counts

On March 6, Block dismissed counts for tax fraud and making false statements to the federal government, ruling they must be tried in federal court in Manhattan. The Espadas were indicted on those charges in Manhattan on March 23. One tax count will be tried later in Brooklyn.

In April 2010, Andrew Cuomo, when he was New York’s attorney general, sued Pedro Espada and 19 others in state court in Manhattan. Cuomo accused them of looting Soundview Healthcare, taking more than $14 million during five years.

Cuomo, who is now governor, sued Espada again a week later over labor violations. The state cases are on hold until the criminal matter is resolved.

At the time, Espada called the civil charges “political payback” for his temporary defection to the Republicans in June 2009, which resulted in a monthlong Senate deadlock.

Then-Governor David Paterson, a Democrat, appointed Richard Ravitch as lieutenant governor, giving him the tie-breaking vote in the Senate. That brought Espada back to the Democratic caucus, which then made him majority leader.

The case is U.S. v. Espada, 10-cr-985, U.S. District Court, Eastern District of New York (Brooklyn).

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