LAWFUEL – The Legal Newswire – MICHAEL J. GARCIA, United States Attorney for the Southern District of New York, announced that IRIS HERSKOWITZ
BAEZ, the former President of the Board of Co-Op City in the
Bronx, New York, and NICKHOULAS VITALE, a former painter in the
Restoration Department at Co-Op City, pleaded guilty today to
participating in a bribery scheme involving the exchange of
$100,000 in cash kickback payments for a Co-Op City painting
contract worth $3.5 million. BAEZ, 59, a resident of the Bronx,
New York, and VITALE, 36, a resident of Brooklyn, New York,
pleaded guilty in Manhattan federal court before United States
District Judge RICHARD J. SULLIVAN. According to the Indictment
filed in Manhattan federal court and statements made during BAEZ
and VITALE’s guilty plea proceedings:
Co-Op City is a New York State Mitchell-Lama housing
cooperative located in the Bronx, New York. As a Mitchell-Lama
development, Co-Op City was established for the purpose of
providing affordable housing for middle-income residents. To
effectuate that purpose, Mitchell-Lama developments such as Co-Op
City charge rents that are considerably lower than the rents that
qualified residents would have to pay for comparable housing on
the open market.
The New York City Housing Authority (“NYCHA”) is a New
York City agency responsible for, among other things, supervising
a Section 8 rental assistance program, which program is regulated
and fully funded by the United States Department of Housing and
Urban Development (“HUD”). As part of the Section 8 Program, HUD
pays subsidies, typically in the form of vouchers, for people to
live in private housing. HUD awarded approximately $976,000
worth of federal funding to Co-Op City in 2000, $834,000 in 2001,
and $738,000 in 2002.
Neither HUD nor NYCHA place any restriction on how Co-
Op City can spend the federal subsidies. Accordingly, the
housing cooperative was permitted to use the federal funds for
capital improvements such as renovations to, and painting of,
apartment units.
New York State, however, imposes certain regulations on
how Co-Op City may spend money on capital improvements, such as
requiring — for any job in excess of $50,000 — that Co-Op City
put the work out for bid, memorialize the agreement with the bid
winner in a formal contract, and subject the contract to approval
by the New York State Division of Housing and Community Renewal
(“DHCR”), which regulates the housing development.
Between 2000 and 2003, BAEZ served as President, then
Secretary of the Co-Op City Board. During the same time period,
a co-conspirator not named in the Indictment (“CC-1”) was an
employee of Co-Op City. From 1999 until July 2000, VITALE was
employed as a painter in the Restoration Department at Co-Op
City, and by October 2000, was employed by Stadium Interior
Painting, Inc. (“Stadium”), based in New York, New York. Between
2000 and 2003, another co-conspirator not named as a defendant in
the Indictment (“CC-2”), was the President and owner of Stadium,
and sought to do business as a vendor with Co-Op City between
2000 and 2002.
BAEZ, VITALE, CC-1, and others agreed that CC-2 would
submit a bid from Stadium for painting work at Co-Op City. In
exchange for help steering the work to Stadium, CC-2 agreed to
pay kickbacks to BAEZ, VITALE, CC-1, and others. Based on this
fraudulent arrangement, Stadium was awarded the Co-Op City
painting job in September of 2000.
At the suggestion of CC-1, the work was awarded on a
probationary basis, which made it possible for Co-Op City to
avoid entering into a formal contract with Stadium, or submitting
its decision to award Stadium the job to DHCR for its review.
From August 2000 through July 2002, Co-Op City paid
Stadium approximately $3.5 million for painting work performed at
the housing development. During the same time period, CC-2 paid
approximately $100,000 in kickbacks to BAEZ, VITALE, CC-1, and
others in exchange.
BAEZ and VITALE pleaded guilty to one count of bribery
in connection with a federal program. The charge carries a
maximum penalty of 10 years’ imprisonment and a $250,000 fine.
BAEZ and VITALE will be sentenced by Judge SULLIVAN on January
23, 2008, at 2:30 p.m.
Mr. GARCIA thanked the New York State Inspector
General’s Office for its investigative efforts and for referring
the case for prosecution. He also praised the investigative work
of the U.S. Department of Housing and Urban Development Office of
Inspector General and the Federal Bureau of Investigation.
This case is being prosecuted by the Office’s Public
Corruption Unit. Assistant United States Attorneys ALEX
WILLSCHER and CHRISTINE WONG are in charge of the prosecution.
07-253 ###
