This was originally published by Bloomberg Businessweek on July 02, 2010.
NY development officials suspended in bonus probes
In the first test of a state crackdown on alleged abuses in the shadow government of public authorities, two local economic development groups have suspended two top executives while investigating more than $1 million they received in bonuses, officials testified Monday.
The presidents of the Fulton County Economic Development Corp. and affiliate Crossroads Incubator Corp. said they and other members of the groups’ two boards only recently learned about the executive bonuses and saw the actual tax returns listing them. Earlier they relied on staff financial reports that didn’t show the extra compensation, they said.
The corporations’ officers were ordered to appear by the Assembly Committee on Corporations, Authorities and Commissions, which is scrutinizing the actions of quasi-public organizations statewide. Recent revisions in the law were meant to shine light on the records and “secretive” activities of organizations that receive public funding and do normally public works with little oversight, said committee Chairman Richard Brodsky.
In one of the most economically troubled upstate counties, FCEDC Executive Vice President Jeff Bray was paid $420,861 in 2007 and $571,452 in 2008, according to the groups’ records and tax returns. Crossroads Executive Vice President Peter Sciocchetti received $377,742 and $547,962 those years.
Much of that compensation was in bonuses paid by Crossroads. Bray’s 2008 salary with the FCEDC was $170,483. Sciocchetti’s Crossroads base pay was $69,935.
Earlier corporation statements defended the performance bonuses as coming from sales of $31 million in properties developed over 18 years by Crossroads, a private real estate holding company.
Attorney Michelle Merola said afterward that representatives of both corporations have met with the state’s new Authorities Budget Office, and that the private not-for-profit organizations intend to adopt new bylaws to make their activities more open to public view.
They are also complying with Brodsky’s committee, which has jurisdiction over not-for-profits, but they oppose being classified as public authorities. That could subject them to disclosures that would jeopardize the privacy of businesses they are trying to attract to Fulton County, Merola said.
