SamPratt.com

Upton Sinclair famously said that “it is difficult to get a man to understand something when his salary depends on his not understanding it.”

Muckraking journalist and novelist Upton Sinclair, Jr.

That aphorism would appear to apply in spades to Ken Flood, the County’s economic development czar, as well as other leaders of the Columbia Economic Development Corporation (CEDC).

On Tuesday, CEDC’s board met to grumble and grouse about the recent Authorities Budget Office Report which blasted their handling of the recent Ginsberg proposal in Ghent. And on Wednesday, Flood issued a press release attempting to put a smiling emoji on the bad news.

Patti Matheney of GhentCANN, the group which submitted the complaint which led to the ABO’s investigation, attended Tuesday’s meeting, and has circulated a blow-by-blow email account of their discussion. She writes:

“I attended the CEDC meeting this morning and frankly, I’m appalled at the cavalier attitude of a number of the Board members regarding this report and the requirements to follow the guidelines and policies of the ABO.

“[Ken] Flood stated that he wanted it to be ‘perfectly clear’ to the Board that these new regulations are a result of the ‘NY State Legislature and the Governor.’

“Mary Bartolotta stated that, ‘we were pretty much a private corporation, until a few years ago.’ Many Board members complained about the need to recuse themselves due to conflicts of interests and opined about how difficult it will be for them to do business going forward under these circumstances.”

In fact, the supposedly “new” regulations which appeared to annoy Flood and Bartolotta were passed in late 2009—by a previous governor and legislature—and went into effect early in 2010. As noted in a February 2010 press release from the State,

“The Public Authorities Reform Act of 2009… after years of stalled negotiations, takes effect today. Among its key provisions, the Act creates in permanent law an expanded independent Authorities Budget Office (ABO) with additional enforcement and oversight power over more than 450 state and local public authorities, industrial development agencies, and local development corporations.”

Not only have such oversight and requirements been in place since the beginning of this decade, the ABO has contacted CEDC previously in an effort to bring the agency into compliance. Even before the GhentCANN complaint, Flood alerted his board in September 2013 that the ABO “had requested a meeting”; that they “were interested in understanding... how they spent their money”; and that they “had visited the office twice and were asking for clarification and further information. [Flood] noted they have been focused on deposits and expenses.”

A month later, the ABO issued a report on the CEDC’s activities. The conclusion of that report found that:

“CEDC was created to promote the growth of industry and jobs in Columbia County. It appears, based on the expenditures reviewed for this report that approximately 61 percent of CEDC activity is related to this public purpose, in the form of grants and loans provided to businesses in the County for start up or expansion. However, CEDC also spends its resources on activities that do not directly contribute to CEDC’s mission, such as contributions to other entities involved in economic development in the area. The CEDC board should ensure that these public funds are spent properly and only to advance the core mission and purposes of the CEDC.”

In short, CEDC’s staff and board had to be well aware of these not-so-new regulations. Indeed, past meeting minutes from the previous year, buried on the agency’s website, include multiple indications that the State was keen to have CEDC members submit important financial disclosure paperwork and participate in required training. The repetitive nature of such minute notes over several years suggest that these tasks were not exactly at the top of board members’ to-do lists.

As Matheney noted in her email,

“CEDC and the CCIDA are public entities, using our tax-dollars for economic development. We have a right to full transparency on how these funds are being allocated. But most importantly, we deserve to have confidence in the integrity of the board members and the processes used in their decision-making.”

Nevertheless, a press release today from Flood glosses over or completely omits the most damning portions of the ABO investigation. Ignored, for example, is the use of land donated by CEDC to Ginsberg for $1 as collateral for a loan from one of the CEDC Board members’ bank.

Likewise, past claims by Flood that “Crawford had not taken part in any discussion or vote regarding the Ginsberg’s project” are thoroughly debunked by the ABO, which noted multiple instances where Crawford “did participate in discussions and voted on issues related to the project.”

CEDC’s actions on Tuesday indicate that while a minority of members are mindful that it is time for the agency to fly straight, a majority still wish to continue on as before.

Matheney discovered that there are four vacancies on the Board—an opportunity to serve not known to the general public. Asking after the meeting “how these openings were being advertised, [Flood] confirmed that the positions are not publically noticed.”

Nevertheless, “two potential new Board members were brought to the Board for consideration,” writes Matheney. “The candidates were Supervisor Mike Benson from New Lebanon, and Kim Keil from Valley Energy. Several members felt both candidates would have potential conflicts and would not broaden the demographics of the board. Bill Better and David Crawford, both cited numerous times in the report of having conflicts of interests regarding the Ginsberg project, were the most outspoken in favor of bringing both onto the board immediately. After some discussion, they were approved for CEDC membership by a vote of 9-6.”

The Board did appear a bit more gunshy on another topic, a resolution regarding support for a water and sewer project in the so-called 9H/66 corridor—code, it would seem for the Commerce Park and the adjoining Ginsberg site. Matheney reports that due to the large number of recusals due to potential conflict of interest, the Board did not have a quorum to vote. But those recusing themselves once again did not specify the nature of their conflict, a specific and repeated problem noted in this week’s ABO report. 

That does not stop Flood, in today’s press release, from claiming that he and the “Staff and the Board of Directors of CEDC are committed to incorporating these recommendations into the organization’s policies and procedures.”

• Conflict of interest problems identified for four board members

• Land sold to Ginsberg’s for $1 used as collateral for $9.5 million loan from board member’s bank

• ABO questions $22K in payments to attorney Bill Better

• Open meetings law violations found; lack of disclosure and transparency termed “troubling”

In a report issued this week, an investigation by the New York State Budget Authorities Office (ABO) into the operations of the Columbia County Economic Development Corporation finds that CEDC has serious problems with conflicts of interest, as well as failing to comply with open meetings law.

Specifically, the report identifies “four current or former members of the CEDC board as having potential conflicts of interests concerning the property transaction between CEDC and Ginsberg Foods.”

The four named parties are Ginsberg’s CEO David Ginsberg, Crawford & Associates President David Crawford, Kinderhook Bank President Robert Sherwood, and attorney Bill Better. Ginsberg is a former President and board member of CEDC, while the others are current board members, with Crawford serving as President.

The findings include that all four failed to provide written disclosures of their financial interest in the Ginsberg’s huge new project in Ghent, while it was under review by CEDC.

Perhaps most explosively, the report notes that Sherwood’s bank “provided Ginsberg Foods with two loans totaling $9.5 million for its proposed expansion project” using the CEDC property as “collateral for the loans.” The ABO writes:

“A review of meeting minutes since April 2014 show that Mr. Sherwood was present at seven of the twelve board and Executive Committee meetings when the Ginsberg Foods project was discussed. However, there is no record of Mr. Sherwood disclosing his interest in the project during these meetings. Of more concern, Mr. Sherwood voted to sell CEDC’s property to Ginsberg Foods. In our interview, Mr. Sherwood acknowledged he did not act as a board member who had a potential conflict of interest. He stated that in retrospect he should have recused himself from the vote.”

Crawford, whose firm has performed extensive engineering and permitting work for Ginsberg’s, was “present at 18 of the 23 board and Executive Committee meetings at which the Ginsberg Foods project was discussed.” Moreover, the ABO found “found instances in meeting minutes where Mr. Crawford did participate in discussions and voted on issues related to the project.” In addition, the State observes that “the Ginsberg Foods loan terms are more favorable than the majority of the other loans,” but finds that CEDC’s loose loan guidelines allow that practice.

In addition, the State investigation found that Crawford participated in email discussions about Ginsberg’s, including communications with the company about facilitating “tax increment financing (TIF) for infrastructure costs of the project.” Emails also showed that Crawford argued for and facilitated a meeting “at the offices of Ginsberg Foods with representatives from a public relations firm (Behan Communications),” which was hired by him and CEDC Executive Director Ken Flood without Board approval.

A CEDC board meeting in 2014

As the beneficiary of a separate $400,000 loan from CEDC, followed by an eyebrow-raising $1 deal with CEDC to acquire  28 acres of land on Route 9H, Ginsberg himself was present at an un-announced Executive Committee meeting “where the project was discussed prior to his resignation,” according to the State report.

Better, in turn, was paid $22,375 in 2014 “to negotiate the [Columbia County] IDA’s financial assistance package with Ginsberg Foods… Mr. Better was present at four of the nine board meetings during 2014 when the project was discussed.” The State notes that Crawford was the one who proposed Better as “the project manager for the Ginsberg Foods project.”

The report concludes:

“We find the payments to Mr. Better by the CCIDA to be a questionable use of CCIDA funds. There is no indication why the services could not be provided by the CCIDA, either by the executive director or either of the two existing legal counsels contracted by the CCIDA. There is no written contract between the CCIDA and Mr. Better, or any records to indicate what services were to be rendered or the fees to be charged. Further, a review of the invoices to the CCIDA show he was paid for calls and meetings with individuals that do not appear to be related to CCIDA’s financial assistance package. For example, there are charges for phone calls to Crawford & Associates including to David Crawford … not related to the CCIDA’s financial assistance.”

Looking at the bigger picture, the ABO’s interviews with CEDC Executive Committee members revealed a lack of awareness and concerns about conflict of interest, with “most indicat[ing] that it is not uncommon for one or more board members to have potential conflicts of interest regarding particular projects or loans,” and that they “do not think it is necessary to always disclose potential conflicts. None of the Executive Committee members were aware of the requirement in the CEDC Code of Ethics for a written statement disclosing a member’s financial interest in a project.”

Overall, “it is troubling that this lack of disclosure is considered routine with other projects and loans. This lack of disclosure and transparency inhibits the public’s trust and confidence concerning board actions,” the ABO concludes.

Ironically, the denial of the project by the Ghent Planning Board may have saved CEDC from further criticism, as the State says that “no harm has yet arisen from the board’s failure to follow its own policies since the Ginsberg Foods expansion project was not approved by the Ghent Planning Board.”

So if Ginsberg’s lawsuit against the Planning Board is successful, that would appear to put CEDC back in hot water.

Meanwhile, the State also takes CEDC to task for a lack of openness, transparency and record-keeping.

Citing Section 102(2) of Public Officers Law , the ABO found instances where CEDC failed to meet requirements for “public bodies to provide advance public notice of meetings, allow for public access to meetings, and formally document and record meeting minutes.” This includes committees and subcommittees, such as CEDC’s Loan Committee and Executive Committee, whose proceedings “CEDC does not provide public notice of… or allow public access to these meetings.”

Moreover, CEDC “does not maintain meeting minutes for its Loan Committee [and] did not maintain meeting minutes for all of its Executive Committee meetings in 2014.”

In relation to the Ginsberg $1 land sale, the State concluded that a July 29, 2014 executive session to did “not appear to be appropriate.”

The ABO investigation was prompted by a complaint filed by citizens group GhenCANN, led by resident Patti Matheney, which has been been watchdogging the Ginsberg’s project. The full report and complaint  can be downloaded here.