Dr. Nano's $43 Billion Empire Buffeted as Bharara Investigates

  • Prosecutors looking at bids for Cuomo's Buffalo Billion plan
  • Program run by Ferrari-driving college CEO at heart of probe

Over three decades, a man who calls himself Dr. Nano built a $43 billion technology empire with New York taxpayer support, and now it may come tumbling down.

It’s a tale that brings together billionaire Tesla Motors Inc. founder Elon Musk, Governor Andrew Cuomo and Alain Kaloyeros, chief of the state’s nanotechnology university and New York’s highest-paid employee. The setting is the remnants of a former Republic Steel plant in Buffalo, and federal prosecutors in Manhattan are watching.

Alain Kaloyeros, left, and Andrew Cuomo

Photographer: Mike Groll/AP

U.S. Attorney Preet Bharara is said to be focusing on construction bids awarded by nonprofit entities Kaloyeros helps run, including one tied to the plant the state is building for Musk’s SolarCity Corp., the largest U.S. rooftop installer of solar panels. There’s no indication that Musk has done anything wrong, but the state development efforts that enabled his planned factory are at the investigation’s heart, according to two people familiar with the probe.

Kaloyeros, a 59-year-old veteran of the Lebanese civil war who until recently drove a Ferrari Spider with a “DR NANO” license plate, is chief of SUNY Polytechnic Institute in Albany, the state capital. He oversees a network of research facilities and corporate partnerships designed to turn New York into a hub for nanotechnology, the manipulation of atoms and molecules for science and medicine.

His vision, based on a model of knowledge and resources shared between government and industry, extends almost 300 miles (483 kilometers) west from Albany to Buffalo on the shores of Lake Erie. It’s composed of $43 billion in state and private high-tech investments with more than 300 corporate partners, Polytechnic spokesman Jerry Gretzinger said. To make it work, he’s relied on nonprofits, which allows him to avoid tax rules that bar the use of state-owned land by private companies, according to a website for one of the nonprofits.

Tool Sharing

Kaloyeros has struck deals with companies including International Business Machines Corp. and Samsung Electronics Co. to buy and share costly equipment used in so-called clean rooms for research. Inside, private employees work side by side with university researchers in their quest for the next breakthrough in computer chips that could revolutionize solar panels or health care.

In a December interview, months before the June subpoenas, Kaloyeros explained how the model drew SolarCity to western New York, where Cuomo has pledged to revive the upstate economy with $1 billion in development funds, an effort called the Buffalo Billion.

“We create the hub, we own the hub, and we control the key assets, and the companies love it,” Kaloyeros said. “They not only come in and partner with us and be secure we’re sharing the assets with them, but they also know we’re bringing an ecosystem.”

Sprawling Probe

The subpoenas inquiring about that system are part of Bharara’s wide-reaching probe of Albany corruption. Already this year, his indictments have toppled the state’s top two lawmakers from their leadership posts.

SUNY Polytechnic Institute and the Empire State Development Corp., a state agency, have both received subpoenas, said the two people, who spoke on the condition of anonymity because the documents aren’t public.

James Margolin, a spokesman for Bharara’s office, declined to comment.

In a Sept. 21 statement posted to its website, three days after the New York Post reported on the subpoenas, SUNY Polytechnic said its funding and contracts are subject to the same oversight as any other agency’s. Gretzinger, the college spokesman, declined to comment further. Kaloyeros declined to comment on the investigation.

Jason Conwall, a spokesman for Empire State Development, said by e-mail that all programs that receive funding from the agency, including the Buffalo Billion, have layers of oversight. He declined to comment further.

Cuomo says he wasn’t involved in the bidding. On Oct. 7, he told reporters in Albany that neither he nor his staff have been subpoenaed in the Buffalo Billion probe. The governor, a Democrat, said it’s too soon to determine whether SUNY Polytechnic should change the way it handles contracting.

“If you knew there was a problem, you would fix the problem,” Cuomo said. “But we don’t know of any problem.”

Lyndon Rive, Musk’s cousin and CEO of San Mateo, California-based SolarCity, said in an Oct. 1 interview that the company wasn’t involved in the bidding and that it hasn’t received subpoenas or been contacted by federal investigators. The factory should be ready for full production in 2017, he said.

Beirut Aflame

Kaloyeros defies the stolid stereotype of a bureaucrat. His Facebook page is a homage to the notion of a man’s man. There are pictures of his muscles mid-workout, postings about driving fast and memes about women, including one from 2014 that reads “when I see a girl with a lot of makeup, I want to use my finger and write ‘wash me’ on her face.”

He poses in pictures with his car while holding a Ferrari-branded donkey doll he calls Enzo, as in Enzo Ferrari.

His journey began on the war-torn streets of Beirut in his homeland of Lebanon. After surviving a 1975 attack, he dropped out of college temporarily and joined a Christian militia to fight Palestinians, he told the Albany Times Union in 2012.

Kaloyeros came to the U.S. in 1980 for graduate school and seven years later received his doctorate in experimental condensed matter physics from the University of Illinois Urbana-Champaign.

Kaloyeros was recruited to New York’s university system in 1988 by Cuomo’s father, three-term governor Mario Cuomo. In 1993, the elder Cuomo designated the state university branch in Albany as a Center for Advanced Technology led by Kaloyeros. The school got $1 million annually in state funding to encourage collaboration with industry on applied research.

That same year, the SUNY system created Fuller Road Management Corp. The nonprofit, on whose board he sits, owns and manages the Polytechnic campus in Albany, now a separate entity from the University at Albany. The nonprofit’s ownership of the interconnected clean rooms and classrooms made it possible for private companies to move in, including IBM.

Upstate Empire

The growth has made Kaloyeros wealthy. In 2013, he collected more than $800,000 in salary as CEO of Polytechnic and more than $500,000 from the SUNY Research Foundation, a nonprofit created to manage interactions with the private sector. In June 2014, the SUNY board of trustees lowered his university pay to $495,000 when Kaloyeros was made president of the college under a rule that he couldn’t be paid more than the SUNY chancellor, he said by e-mail. Kaloyeros’s earnings remain about the same from the Research Foundation, around 0.2 percent of the approximate $300 million in grants he brings in annually, he said.

In 2009, the SUNY system created the Fort Schuyler Management Corp. to develop research facilities tied to the nano college. After Andrew Cuomo’s promise in 2012 to invest in Buffalo, Fort Schuyler, which includes Kaloyeros among its board members, was tapped to handle bidding, management and ownership of Buffalo Billion projects.

Among federal prosecutors’ points of interest, based on the subpoenas, is Fort Schuyler’s October 2013 request for proposals to build the Buffalo project that would become the SolarCity factory, the New York Times reported last month. The factory was initially to be constructed for Silevo, a solar-panel builder SolarCity bought in June 2014.

The state will own and equip the $900 million factory on the former Republic Steel site, covering $750 million of it, including $500 million from the Buffalo Billion pot. It’s estimated that it will create more than 3,000 jobs. SolarCity will lease it for $1 a year for 10 years.

The Investigative Post, a Buffalo media outlet, reported that the initial request was written to exclude all bidders except LPCiminelli, a construction company in the city and a top Cuomo campaign donor. While the request was opened to more bidders within days, Ciminelli still won the $1.7 billion contract to build out a complex that included the solar-panel factory with state and private funding sources.

Kaloyeros said in December that the SolarCity factory, slated to be the largest of its kind in the Western hemisphere, was the culmination of decades of work.

“I did something I love doing,” Kaloyeros said. “Shoot an arrow and then paint the target.”