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Industry holds its breath as Bharara investigates Silver

By Konrad Putzier

New York Assembly Speaker Sheldon Silver’s arrest on corruption charges has sent shockwaves through the real estate industry, as developers and tenant advocates try to figure out how the investigation will affect their future.

SHELDON SILVER
SHELDON SILVER

Silver was arrested last week on five counts of corruption. In his indictment, U.S. Attorney Preet Bharara accuses Silver of having referred two unnamed developers to a law firm in exchange for hidden payments from the firm. Although unnamed, several reports have cited Leonard Litwin’s Glenwood Management.

Bharara alleges that the developers knew about the payments to Silver, and benefitted substantially from tax abatements by the state. For example, Silver supported a re-authorization of rent controls that was “considerably more favorable to the real estate industry than expected,” after meeting with lobbyists in late 2011.

Silver is accused of raking in $700,000 for the referrals from the law firm, which is run by his former aide, Jay Arthur Goldberg. In addition, he is said to have made $5.3 million as an outside counsel to law firm Weitz and Lutzenberg since 2002.

Neither of the two developers was charged with any wrongdoing, but the investigation is bound to raise scrutiny on the industry’s cozy ties with state politicians.

The New York Post reported that Bharara is also investigating $35 million in 421-a tax abatements granted to Extell’s luxury condo tower One57.

While developers are facing scrutiny, Silver’s arrest left tenant advocates in a state of uncertainty.

Despite his ties to the real estate industry, Silver has been known as an advocate of tenants’ rights. In 1997, he was instrumental in preventing the Republican-led State Senate from ending rent regulation in New York City.

Rent regulation is due for renewal in 2015, as is the 421-a tax abatement program, which grants tax breaks to certain residential developers.

Mike McKee, of the tenant advocacy group TenantsPAC, said it was too early to predict how Silver’s arrest would affect tenants. But he was critical of replacing Silver’s role as speaker with a group of five Assembly members, which he referred to as “five-headed monster”.

McKee added that it is now more urgent that ever for tenants to fight for their rights.

“The Senate Republicans are owned by the real estate lobby and we can’t get a bill out of committee,” he said. “The Senate Democrats can help with the message, but the Republicans are much more disciplined at voting as a bloc. When their leadership says this is how we’re voting, they fall in line. Democrats are much more fractious.”

Sabina Mollot contributed reporting.

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