The Bada-Bing Boys

Perhaps the hottest real estate project in recent MTA history is the authority's new 2 Broadway headquarters. The 2 Broadway tale could be one of those immigrant rags-to-Armani sagas New Yorkers so savor. But in a contemporary twist, a competing story line implicates the mob and MTA crony culture, with hundreds of millions in cost overruns-- and huge, long-term debt nearly equaling the cost of building the project.

The story begins with a former cab driver from Soviet Georgia, Tamir Sapir. In the mid-1990s Sapir bought a distressed 1.6-million-square-foot clunker from the bankrupt Olympia & York empire for what amounted to pennies in mogul money--$20 million. Then Sapir offered to lease it to the MTA. But the building wasn't exactly in move-in condition. The MTA insisted it be fixed up, which the cash-strapped Sapir couldn't afford. He couldn't start remodeling without a loan, and he couldn't get a loan until reluctant MTA staff professionals approved the project. To smooth out the hitch, Sapir turned to The Fonz. Former Senator D'Amato called the head of the MTA--Kalikow's predecessor, who was also a Pataki appointee and who also rents space in Kalikow's 101 Park Avenue Tower--and got the approval. This is the famous half-million-dollar phone call D'Amato made in 1999. For just having the guts to make a cold call, D'Amato earned $100,000. Because the deal went down, he got an extra $400,000. Eventually Sapir was able to shift the cost of the call to the riding public.

But Sapir's 2 Broadway problems were just beginning. He was a deal guy, not a hands-on construction supervisor, so he turned over control of the remodeling to Fred Contini, who used to work for him. But sadly, as it turned out, Contini really worked for the Gambino crime family. Specifically, Eddie Garafola, brother-in-law of Gambino underboss and multiple murderer Sammy "the Bull" Gravano. Companies controlled by the Gambinos got ten separate subcontracts on the 2 Broadway job.

Under Garafola's construction site management, there ensued the classic labor peace racket: Three unions on which the mob has leverage agreed to go along with the requests of mob-controlled companies, pretending to hire union labor at the union rate but instead hiring nonunion workers, while billing at the higher rate, keeping the difference as a kickback or distributing it to the mob-controlled subcontractors. Payments to nonexistent workers were collegially laundered by fellow wiseguys in the Genovese crime family.

Meanwhile, project costs went up and up. There was an early estimate of $135 million, but now State Comptroller Hevesi says the real number will be closer to $450 million; with interest, it balloons to $850 million. Here was a building that cost about $8 a square foot but will wind up costing more than $700 a square foot. And all for a building MTA is leasing, not owning.

Investigators have ruled that none of this was either Sapir's or the MTA's fault. Both were victims. Sapir did admit he hadn't carefully supervised Contini and was frequently away on business trips. "When the cat's away, the mice will play," explained Sapir to a New York real estate magazine interviewer. One fact not yet nailed down by investigators, though, is how the former cab driver from the former Soviet Union, with little capital and less experience in highrise rehab jobs, got a mammoth nine-figure, no-bid MTA lease. It's "a secret government," observes Democratic State Assemblyman Richard Brodsky, who's been probing the MTA in Albany.

Unfortunately, the MTA is no anomaly. It's just one fairly big province in a much larger governmental empire--the New York "authorities," which tend to operate under permissive governance and financial principles. In 2004, when last audited, New York's 734 authorities owed altogether nearly $120 billion. Unlike the state, the authorities don't need voter approval to issue bonds. Unlike the city, they aren't limited by the value of real estate. All they need to reach the financial markets are bond dealers who want a payday. That's why authorities were invented.

But although the city and state are able to finance projects by using the authorities, they're approaching crunch time too. In December the New York City Comptroller issued a report saying the city had $69 billion in debt. And the state--separate from the authorities--is indebted to the tune of another $48 billion. So the three New Yorks combined owe $237 billion.

If New York were a sovereign country, it would rank eighth in external debt, edging out China. With that kind of obligation, no wonder one financial expert quoted on the strike's first day by The Bond Buyer, a Wall Street daily specializing in public finance, estimated that the city could not take much more than one week of the walkout before its own securities came under pressure.

It's also no wonder that as far as the city's FIRE elite are concerned, that middle-aged black woman who cleans subway platforms is no Rosa Parks. Selfishly, she wants to escape the scurrying rats and suffocating metal dust by retiring at age 50; an Albany bill sponsored by the transit union to accomplish just that failed when Pataki vetoed it. Is there a political lesson here? After transit workers struck, Pataki ordered the state to impose heavy Taylor Law fines. Brian McLaughlin, head of New York City's Central Labor Council, proposed that each of the city's 1.5 million union members contribute a dollar as a principle of solidarity to each striking transit worker. A more practical strategy, though, might have been for each of the transit union's 33,700 members to have given a dollar to Pataki.

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