Month: December 2012

Oh, Larry

The Northeast Bronx Redevelopment Corporation (NEBRC) is a non-profit formed in 1992 “formed to provide educational, recreational and cultural programs for the people of the Northeast Bronx.”  The organization sought appropriations from the New York State legislator and was awarded NYS Education Department grants; all in all totaling over 1.4 million dollars between 1993 and 1998.  The appropriations were awarded by then State Senator Lawrence Seabrook, and the grants were awarded towards the organization’s goal to built and operate a youth center.  Since the organization’s creation in 1992, Seabrook has supported the organization through discretionary funding from the State level and more recently at the City level.  While the funding continued to roll in, the operation of the NEBRC has been called into question, issues of conflicts of interest have been raised about the staff of the NEBRC, and now City Councilmember Seabrook has been indicted, tried, and found guilty of corruption and money laundering.  And the youth center has yet to be constructed.

An audit conducted by the New York State Education Department of the NEBRC, between 1993 and 1998 found over $45,000 of state funding unaccounted for entirely, 54% of the total funds questionable, and a lack of control over fiscal or administrative activities.  “NEBRC has not completed its annual financial statements in a timely manner, or filed its required reports with the IRS in a timely manner, and has not maintained an adequate inventory system.”  The audit found that the NEBRC had written a manual to address financial and administrative duties and responsibilities, however they were not following through.  Furthermore, “NEBRC has not accomplished the primary purpose of the legislative grants to organize, build, operate and maintain a youth center…NEBRC’s operational plan does not identify a facility where services will be offered.” In five years, the NERBC was poorly managed and did not meet any of the organization’s set goals.  However, Seabrook was not deterred in his funding decisions.

Roughly around the same time Seabrook moved from the State Senate to the New York City Council, he helped form another non-profit, the African-American Legal and Civic Hall of Fame, which was formed with the purpose of producing and sustaining the African-American Bronx Unity Parade.  In 2009, the New York Times found that “the African-American Bronx Unity Day Parade has left the lightest of footprints.  It has never received I.R.S. approval to actually operate as a nonprofit. It has never filed a tax return. And, it seems, it has never run a parade…From July 2004 through March 2007, the city paid more than $156,900 in rent reimbursements for space that the parade organization paid only $40,000 to rent.” And the parade has yet to be produced.

Why would an elected official continue to pour more and more of his district’s own money into ineffective organizations?  Why were these groups chosen by Seabrook year after ineffective year?  In February of 2010, the Manhattan US Attorney provided the public with an answer in a press release headlined, “Seabrook Also Accused Of Fraudulently Steering More Than $1 Million In New York City Council Discretionary Funds To Non-Profits He Controlled To Benefit His Friends And Family.”  The charges against Seabrook included accusations of his funding to these organizations due to his ties with their staff members.  The executive director of each of the organizations was Gloria Jones-Grant, a girlfriend of Seabrook’s.  The organizations have also paid over $600,000 in consulting fees to Seabrook’s brother, sisters, nephews, and even a $750 consulting fee to Seabrook’s 16 year old grand-daughter.  There is even a record of a lunch Seabrook put on the books for $170 dollars.  The contents of the lunch?  A bagel and cream cheese.

On the one hand, family members have employed one another in the past with tremendous results; on another hand the rules in place at the time of his accused actions permitted his behavior; on yet another hand, as long as someone earns a salary that Seabrook feels is insignificant enough then their qualifications should not come into question, even if the results of that person’s work have proven insufficient time and time again.  In none of Seabrook’s defenses does he answer questions about the organizations’ failures, or the failures mentioned in either the 1999 or 2006 audits.

More than anything I wish I could have been in the room when Larry Seabrook had the conversation with his girlfriend, Gloria.

Larry:  Ok baby, I’m going to make all your dreams come true.  As long as your dreams involve lying to the New York legislature and syphoning off hundreds of thousands of dollars from the electorate.

Gloria:  Oh Larry, you make me so hot.

Larry:  Good, because I’m going to have an assorted affair with you while keeping you on staff so you can stow away money for me and the rest of my family also, and when push comes to shove, I’ll just throw you under the bus.

Gloria:  That’s fine, I still love you.  I’ll stand by you and lie for you and we’ll get through this!

Larry:  Sure thing, I’m definitely not going to say I never knew you or loved you in courts or on TV and told you to do anything and that I’m ashamed to have known such a careless and insufferable woman.  Under oath.  And you’ll definitely not get screwed of all your potential for future employment or the chance to live a normal life ever again.

Gloria:  Let’s make out.

I mean, I wasn’t there, but I imagine it was something like that.

There were failures on nearly every level of potentially accountable people and entities.  The staffers who worked along side Seabrook’s family in all three organizations and did not raise any issues until compelled by a subpoena.  The Speaker of the Council Christine Quinn for continuously approving a discretionary budget for Seabrook without a finer investigation into his allocations.  The voters for voting in Seabrook for a third term to the City Council, after he had already been under investigation twice before.  The lack of connection made between the State legislature and the City legislature, allowing for two independent audits to come to the same conclusion seven years apart from one another and funding continued after both became public.  Whatever Seabrook’s incentive has been, be it nepotism, sheer greed, or obtaining political points in his community, until 2010 there was little to no disincentive enforced.

Non-profit organizations themselves are responsible for creating a culture of reporting internal cases, but on a larger scale the legislature is responsible for creating a similar culture among the citizens of New York.   That culture could be altered by Speaker Quinn; she had the opportunity to not approve Seabrook for a further $350,000 of discretionary funding for the coming fiscal cycle, while he is under investigation and on trial.  However, Quinn has stood firm in her decision to allow him the money.  In her defense, Quinn said, “We no longer have an honor system. We have a verification system, where the groups that are seeking funding from the Council are taken through an aggressive vetting process.”  Quinn’s decision not to impose discipline on Seabrook provides little disincentive not to follow in Seabrook’s path; rather, it merely allows the opportunity to find other ways around the rules as Seabrook has been doing for decades.  A true disincentive and punishment system must be set in place by those with the authority to impose it, while all Quinn has implemented so far is a more red-tape filled honor system.

We can tar and feather Larry Seabrook as many times as we want, but until the systematic issues are addressed all we will be doing is funding the tar and feather industry.  New York City’s protection against discretionary funding abuse is only a few steps removed from a bank putting up a sign over its open vault that reads “please do not steal.”  Larry Seabrook stole the money, the jewelry, even the sign, while no one seemed to notice or care.  Our elected officials were too busy worrying about polling numbers and fundraising efforts to realize the devastating problem they could have been addressing all along.  The problem is larger than one district, even larger than one city.  Corruption happens all over the world, and sometimes even New York isn’t the first to realize something.

This is my paper on restructuring African land tenure systems. Start with an idea and build it out. The white board wall helps.

It starts with the problem, identifying concrete examples of the problem, explaining the problem in 3 different regions (Kenya, Rwanda, Tanzania), then showing how they share systematic problems, what’s the new idea, how does it work, how would it work, what happens next.

On the right is the new system broken down.

Where We Are Now

In a perfect world, all of these processes and systems are equitable, incorruptible, and raises the credibility of our elected officials.  In a perfect world funding is distributed to those organizations and programs which serve the people’s needs effectively in ways local government cannot; groups that foster relationships between the needs of the community and the resources of the city.  In a perfect world all politicians are pure, noble, dedicated, honest public servants.  The problem is you usually only meet those politicians while they’re losing an election to a candidate well funded by special interests.  The world isn’t perfect, politicians aren’t perfect, the system isn’t perfect.  The discretionary funding system is so easy to manipulate, you’ll be angry at yourself for not devoting yourself to a life of crime sooner.

Imagine for a period of time that you are a corrupt politician.  Or a budding corrupt politician.  How would you go about laundering money?  The concept behind money laundering and embezzlement is actually simpler than you might think.  Every year the New York City Council debates budget allocation.  How much money goes to parks, how much to schools, infrastructure, how much for this project, how much for that project.  It’s what they spend the majority of their time doing.  A portion of that budget every year gets sectioned away for discretionary funding.  These are funds, which each Councilmember has for their own allocation amongst programs in their respective districts.  Usually, ideally, in a perfect world, the funding is meant for local programs, which the citywide budget wouldn’t normally get to.  Local senior centers, after school programs, a tree, these sorts of items can and should be funded by a Councilmember’s discretionary funding.

Now, say for example, the funding goes to an organization meant to alleviate unemployment by offering adult career services.  You might think that organization needs to undergo some sort of vetting or oversight process.  It does not.  You might think the people running that organization, employed by your tax dollars, would need to adhere to some sort of vetting or oversight process.  They do not.  You might think that if an organization is funded by public dollars for years and the people who ran the organization were direct relatives of the Councilmember who funded it and the goals of the organization had never been close to met, this might raise some sort of flag and it might be a shade of red.  Can you see where I’m going with this?

There is a church in Staten Island, which recently fell victim to a funding scandal.  The bookkeeper, a sweet old church going lady, was arrested for several accounts of embezzlement.  What was her secret?  Writing herself checks just under the amount which would have required permission from her supervisor.  She took just enough to never be noticed for decades and stored it away.  Her ultimate downfall wasn’t the clever findings of an employee, just an upgrade in the technology used to store the data, which triggered an alarm.  She would have made a great City Councilmember.  What corrupt politicians have institutionalized is taking a little money here, a little money there, just enough for no one to notice.

Back to you, the criminal politician.  The basic premise of stealing discretionary funding first lies in creating your phony or shell company.  These organizations need to serve a dier need in the community, such as unemployment or after school programs or cultural centers.  Then you found the organization and you staff it with those you trust and with whom you funnel the money through.  They should be close friends, companions, family members.  People you keep close to your heart, people who will never turn on you, people who will always have your back.  People who, if it came to it, you would sell out to the police at any given moment.  You’re a spineless thief after all, remember to stay in character.

Once you have your fully staffed organization, you just have to have them apply for your discretionary funding, make some impassioned speeches about how your community needs the services they provide (ok, they don’t have to be THAT impassioned, but try to get into it) and then funnel the money over to your shell company.  The trick next is to not use that money for anything you said it would do, you just keep the money.  Maybe the employees make campaign contributions to you, maybe they buy you that boat you’ve always wanted but were too poor to afford as a thank you for founding their organization, or maybe they just hand you a bag of unmarked bills with a dollar sign on the side of it.  The choice is yours, Mr. or Mrs. Corrupt Politician.  Be creative.  Luckily you won’t have to worry all that much because once the money is allocated from the Council budget to the Councilmember and approved, there’s no oversight to its use or effectiveness of the organization.  It’s a good faith kind of thing.  Like the give a penny take a penny cup.  Only with billions of pennies (but only millions of dollars).

How can this be true, you’re probably asking yourself, or asking me through yourself.  The problem is that these funds go to so many organizations in such varying degrees, that you would need an entirely new entity just to oversee and ensure the effectiveness of the awarded money.  But we’ll get to that later.  One key is in the discretionary fund’s allocation from the City budget, because the corruption starts way before it even reaches your corrupt politician hands.

Before you, the greedy politician, even have the chance to ask for your share of the discretionary funding, first you need to make sure you’re in bed with the right politician.  There’s really no worse feeling than waking up next to the wrong politician.  If you get to extort people into voting and supporting you so you can pay them back with laundered city funds, then you first have to vote and support the New York City Council Speaker.  The Speaker is elected internally, by the City Councilmembers, a progress begging for political patronage.  In fact if you look up political patronage in the dictionary there’s a footnote: *please see New York City Council Speaker.

The Speaker acts as the deciding vote in the case of a tie, presents the final budget to the Mayor, and allocates the discretionary fund pot amongst the Council.  Let that sink in for a moment.  Ready?  One Councilmember, someone elected in their district, gets to decide on his or her own, how the discretionary money is allocated amongst his or her colleagues.  The Councilmember of one district is the sole decider of how much money goes into all 51 districts.  Not a team of people.  Not a committee.  Not an independently elected position.  Not an objective and non-political appointee.  The Speaker, voted in by one district, one constituency.

How is a Speaker elected?  I’ve never been a first hand party to the process, but I can imagine a fair amount of political favors, under and over the table deals, alliances, personal vendettas, political factions and ambitions all play a major role.  So it should be no surprise that those Councilmembers who are closer politically to the Speaker get a higher percentage of the pie, than those who call out the Speaker on issues or have a bloody past.  The money from the people, intended to serve the people is diluted and tempered with the stench of politics and corruption before it even has the chance to be stolen.  If you intend to steal it, make sure you stay close to the Speaker.  One Councilmember in particular flew too close to the sun, and after syphoning off city and state funding for decades, finally fell.  Enter – Larry Seabrook.

Allowance

Ok kids, who here gets an allowance?  A few kids raise their hands.  Ok, now do your parents give it to you?  Nodding!  Do you get to spend it on whatever you want?  The beginnings of nodding but then the realization that the question is deeper than originally anticipated.  Well, I get to spend it on…while they started to think about whatever it is that six year olds spend money on, I waited and let the question sink in.  It was an early morning at PS31 in Brooklyn at their yearly career day and I was elected to represent my boss – a citywide politician who controls the NYC pension fund, manages billions of dollars in assets, oversees city contracting, and conducts citywide audits – at an elementary school career day.

The morning started with breakfast in the quaint school library on tables and chairs designed for children, with us “professionals” gathering around the danish and coffee table.  The bit I had gone over in my head was quickly thrown out the window when I realized I would be surrounded by firefighters and teachers and pilots.  Explaining politics, especially financial political offices, is tough enough to break down to well educated adults with an interest in local government.  Today my job was explaining this to 6, 7, and 8 year olds.

Ok kids, now who here gets an allowance?  What do you get to spend it on?  Do you get to spend it on whatever you want?  Sommmmeetimes.  But sometimes you have to save it and put it in the bank, right?  An unhappy reminder induced yeeeeeees.  That’s kind of like what taxes are!  Taxes are things that the Mayor takes away from everyone to buy things that we all need like teachers and firefighters and playgrounds.  Who here likes playgrounds?  (Hint: everybody likes playgrounds.)  The teachers in the room were appreciative that the kids finally acknowledged their services as necessary, or at the very least felt proud to be compared to a playground.

Whether or not any of these kids now have a better understanding of local government, or would actively pursue a career in public service, I doubt despite my best efforts.  But it did get me thinking about the foundation which we base our knowledge of government and taxes.  Most of us, by which I mean myself, never had taxes explained to us.  We didn’t get guest speakers or applicable metaphors for what government is and does until high school at which point you’re too rebellious to care about the morals and ethics of fair and equitable government.  It’s something controlling, my parents are controlling; I hate my parents, I hate government.  We don’t understand what government does with our money in great detail, we don’t get a tutorial in budgetary processes, we aren’t taught lessons in what FICA is or does, we just know that they took some of my hard earned money I made at KFC.  We don’t see the line items for roads and police task forces; or the debates for funding for street signs.  We don’t know where it goes, what it does when it gets there, or who’s doing it.  We trust our elected officials to make these decisions for us.  We trust they act honestly and with our best interests.  This is why it has been so shockingly easy for those who do understand and control the systematic processes to abuse, corrupt, and steal in plain sight our allowance right out from our pockets.