Silver Trial Shows Cost of Keeping Friends in High Places

  • Manhattan developer gave $125,000 to Assembly speaker's group
  • Glenwood hired Silver-associated law firm to fight taxes

Sometimes, you have to pay to keep friends in high places.

It cost Manhattan apartment owner Glenwood Management Corp. an extra $100,000 in political contributions in 2012 to stay on the good side of New York Assembly Speaker Sheldon Silver. But according to testimony in Silver’s corruption trial in Manhattan, that kind of a payment just scratched the surface of bigger, more complex schemes to keep the speaker happy.

Glenwood, like other New York real estate developers, depended on Silver to help push through laws in Albany that extended tax breaks, helped with low-interest loans from state housing finance agencies and abated the impact of New York rent stabilization laws. That meant maintaining a year-round lobbying effort with a lot of perks tossed in for good measure.

“All we did was build luxury rental housing,” Richard Runes, a lawyer for Glenwood, testified Monday. “If those programs were altered or disappeared, it would be difficult for us. We don’t build shopping centers. We don’t build office buildings. That’s all we build.”

So, when Silver called Runes seeking a donation from Glenwood for his Democratic Assembly Campaign Committee, the lawyer wasn’t going to say no. Runes said he offered $25,000, even though the money was going to a group of politicians who were more sympathetic to tenants than landlords.

Silver suggested the donation should be five times what was offered, Runes testified.

Glenwood’s founder Leonard Litwin approved the $125,000, Runes said. Neither man nor the developer is accused of wrongdoing.

Absolute Control

Silver, 71, was one of the most powerful politicians in New York for more than two decades, with absolute control over Assembly rule making that gave him power to decide which bills would go for a vote. He was indicted in February on corruption charges for reaping almost $4 million in what the government says were illegal kickbacks, including about $700,000 in secret referral fees tied to Glenwood. He stepped down from the post of speaker after he was charged.

Silver’s lawyers have denied he did anything wrong, saying referral fees are standard in the legal industry.

The former speaker, along with the governor and the Legislature’s leadership, “take a fairly hands on role” in negotiating tax and rental programs affecting developers and have influence over a board that approves low-interest bonds, said Runes, who organized Glenwood’s lobbying efforts for 15 years.

The 421-a tax abatement program, which phases in property taxes on apartment buildings over as long as two decades, was renewed in 2011 and again this year, under different terms. In June 2011, the Legislature also passed changes to rent regulation that scaled back some of the hurdles the Assembly sought to place on landlords before they could raise rents to market rates.

The final law let an owner raise the rent to market rates if the tenant earned more than $200,000 for two consecutive years and the rent exceeded $2,500 a month -- an increase from the previous threshold of $175,000 in income and $2,000 rent. Originally, though, the Assembly sought to set the income limit at $300,000 with rent of $3,000.

Glenwood’s financial interest in Silver did not sway his official actions, his lawyers said, citing a long list of pro-tenant bills that passed the Democratic Assembly under his leadership.

In exchange for kickbacks, Silver is accused of steering developers with business before the state to a law firm where the speaker had a retainer agreement.

Goldberg & Iryami

Glenwood was among the developers to hire Goldberg & Iryami PC, a two-attorney firm founded by Jay Arthur Goldberg, Silver’s childhood friend. The firm fights for reduced property-tax assessments for landlords and collects a cut of the tax savings they win for their clients.

Goldberg & Iryami sent a 25 percent cut of the fees it collected from Glenwood to Silver, something the firm didn’t disclose from the time it was hired by Glenwood in 1997 to 2009, when a change in laws required the disclosure to be made, Dara Iryami, a partner in the firm, testified at the trial. Iryami made a deal with the government to testify in exchange for not being prosecuted.

It was like “holding a tiger by the tail,” when he found out about Silver’s arrangement with the law firm, Runes testified. “You have a difficult choice to make: Do you let go, or not?”

Asked by prosecutor Howard Master what he meant, Runes replied: “We had the choice, as I said, of terminating the relationship” and risk alienating Silver, or maintaining the arrangement. The developer chose the latter.

“There was concern not to make an enemy out of Mr. Silver,” Runes said. “We had no desire to do that.”

Silver got paid only if the law firm achieved results for clients, his lawyers said. Goldberg, whose legal experience spans nearly five decades, was sought out by other large developer clients, such as Cammeby’s International, who were not referred by Silver.

By 2014, Goldberg & Iryami was appealing taxes on as many as 20 of Glenwood’s properties, earning the law firm about $2.69 million in fees from 2005 to 2013, according to testimony at trial.

Invoices sent to Silver with his payments referenced "your efforts in connection with the reduction of real estate assessments of the above-referenced properties."

There was no expectation that Silver would be involved in preparing the tax appeals for Glenwood, or appearing in court to handle the developer’s case though, Iryami testified.

"Who did the work?” prosecutor Andrew Goldstein asked.

"I did,” Iryami said.

The case is U.S. v. Silver, 15-cr-00093, U.S. District Court, Southern District of New York (Manhattan).

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