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NYT: Cuomo Accuses Espada of Diverting Millions From Clinics

April 21, 2010

Cuomo gains attention in advance of his anticipated run for governor:

ALBANY — Attorney General Andrew M. Cuomo filed a civil lawsuit against the Senate majority leader, Pedro Espada Jr., on Tuesday, accusing Mr. Espada, his family and his political aides of siphoning more than $14 million from a network of nonprofit health care clinics he founded — money used for meals, vacations and campaign expenses.

Mr. Espada used the network as a “personal piggy bank,” the suit said, to pay for expenses over the last five years like $20,000 worth of takeout sushi and $50,000 to maintain a Bronx apartment where opponents have asserted that he does not live. He was also given a severance package now worth $9 million that would leave the clinics bankrupt if paid out, the suit said.

Mr. Espada, a Bronx Democrat, was able to drain money from the organization, the Comprehensive Community Development Corporation, by stacking its board with relatives and Senate employees, the suit said.

“I have not seen anything on this scale,” Mr. Cuomo told reporters in a conference call on Tuesday. He said that the civil suit was probably only his first move against Mr. Espada, who was elevated to majority leader by Senate Democrats last summer after agreeing to end a monthlong coup that had paralyzed state government.

“I think criminal charges are a very real possibility,” Mr. Cuomo said. “Stay tuned.”

The suit, part of a continuing investigation by Mr. Cuomo into Mr. Espada’s political and business activities, seeks to remove Mr. Espada as president of the nonprofit corporation, which runs four health clinics in the Bronx that receive most of their financing from the federal and state governments.

The lawsuit, which names 19 current and former directors of the corporation in addition to Mr. Espada, also seeks to remove its entire board. Mr. Cuomo said it had rubber-stamped millions of dollars’ worth of inappropriate contracts and expenditures.

Those expenditures, the suit said, also included the use of a Mercedes-Benz by Mr. Espada; vacations for the senator and his family to Las Vegas, Miami and Puerto Rico; and at least $100,000 worth of campaign literature paid for with money funneled through the clinics, known as the Soundview HealthCare Network.

The board also appears to have approved for Mr. Espada a $9 million severance package, which far exceeds Soundview’s net assets, leaving the network technically insolvent.

At a news conference on Tuesday, Mr. Espada repeatedly refused to address the charges, saying he would do so in court. But he described the investigation as “simple political payback for what the establishment likes to call the Senate coup.”

Mr. Espada, whose long-running battles with prosecutors and election officials are the stuff of political legend, also faces criminal investigations by federal prosecutors into possible money laundering and by the Bronx district attorney, who is looking into whether Mr. Espada actually lives in his Bronx Senate district, as required by law.

But the lawsuit filed by Mr. Cuomo may be the greatest threat to Mr. Espada’s political career. In seeking to remove Mr. Espada and his associates from Soundview, Mr. Cuomo is moving to dismantle the political machine that has made the senator a force.

Soundview’s bank accounts, the suit said, provided money to Mr. Espada for his political campaigns, and the organization’s employees served as campaign volunteers. The nonprofit also provided patronage jobs for Mr. Espada’s allies, the suit said.

The clinics, Mr. Cuomo alleged, also helped pay Mr. Espada’s legal fees — and even covered the $2,500-a-month cost of the Bronx co-op Mr. Espada claimed as his legal residence when he embarked on his 2008 Senate campaign.

“This perversion of Soundview improperly enriched Mr. Espada and corruptly enhanced his political status,” the complaint charged.

The expenses were all approved by Soundview’s board, which Mr. Cuomo said has included at least five past or current members of Mr. Espada’s Senate staff and at least six people with family ties to the senator, including two uncles, his sister’s boyfriend and the mothers of two of his grandchildren.

“I find it disingenuous to demonize my family simply for working for a business that I founded,” Mr. Espada said, taking a swipe at Mr. Cuomo, who is expected to run for governor this year, and his father, former Gov. Mario M. Cuomo. “It is no more inappropriate than working for your daddy as the hatchet man and then aspiring to step on his shoulders to be governor.”

The Soundview network brings in millions of dollars a year in federal and state aid to deliver health care to poor patients, much of it through Medicaid and Medicare reimbursements. But the investigation found that what Mr. Cuomo described as Mr. Espada’s “looting” of Soundview had left the clinics in a precarious financial condition.

As an outside accounting firm tried to clean up Soundview’s books in 2007, the complaint said, a Soundview official directed the accountants to ensure that Mr. Espada and his family were paid before any other financial obligations were met, including Soundview’s rent and utilities.

Even as Soundview handed out millions of dollars to Mr. Espada and his associates, the suit said, the clinics failed to pay hundreds of thousands of dollars in payroll taxes, an omission that led state officials to cancel a $3 million contract last year that would have allowed Soundview to build a new clinic.

Soundview also continued to employ three women who were convicted in 2005 of diverting public money to Mr. Espada’s campaign. As a result, state health officials denied Soundview’s application last year to resume financing from the federal Women, Infants and Children program, which provides food and nutritional counseling to new mothers and young children.

Some patients visiting Soundview’s White Plains Road clinic on Tuesday said they were outraged about the allegations.

Danette Williams, 26, a home health aide who lives in the Bronx, said that the clinic had been a vital part of her life, providing prenatal care to her. “I would hate to think he’s a person who claims to be about the community,” Ms. Williams said, “but it turns out he really isn’t.”

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