Tainted contract nets LPCiminelli $20 million

Federal prosecutors say top executives at LPCiminelli went to great lengths to ensure they would win the lucrative contract to build a factory for SolarCity at Riverbend.

Just how lucrative?

State officials refuse to say how much the company is being paid. But Investigative Post has calculated, based on interviews and public records, that LPCiminelli’s fee for the project works out to between $20 million and $22 million.

That’s one of the largest developer fees paid out in the region in recent years, because of the sheer size of the project, according to construction industry sources.

Three LPCiminelli executives, including CEO Louis Ciminelli, are facing federal criminal charges of bribery and bid-rigging over their actions leading up to the awarding of the contract.

“This is a legal and bureaucratic and governing mess that’s a complete embarrassment to New Yorkers,” said John Kaehny, executive director of good government group Reinvent Albany.

“We have a company whose senior executives are under arrest for bid-rigging that is getting in excess of fifteen to twenty million dollars in profit from this contract,” Kaehny said.

At 1.2 million square feet, the factory developed by LPCiminelli will be the largest solar panel manufacturing plant in North America. The construction is essentially completed, with SolarCity set to begin production next summer.

The state is spending $959 million to bring SolarCity to Buffalo, including the cost of building and equipping the factory, and remediating the 202 acre site. The SolarCity plant is taking up less than half of that space, meaning the state is banking on being able to attract other companies to the site. SolarCity is committed to employing 500 at the factory and another 960 in the Buffalo area, with a total of 5,000 jobs statewide.

Company’s profit

LPCiminelli’s fee is 3.5 percent of the total cost of the project, according to company president Frank Ciminelli II. That’s a decrease from the 4.5 percent fee the company charged for some earlier work on the project, according to state records.

Ciminelli said the company reduced its fee “as the project evolved, despite the extraordinary amount of responsibility and risk we accepted under the contract.”

The state has been unwilling to disclose how much LPCiminelli stands to make from the work at Riverbend.

The Fort Schuyler Management Corp., the state-affiliated non-profit that was overseeing the SolarCity project, has fought to keep information about the company’s fees a secret, redacting relevant sections from records Investigative Post obtained under the state’s Freedom of Information Law.

The decision to award LPCiminelli the contract came under scrutiny from U.S. Attorney Preet Bharara after Investigative Post reported that the original Request for Proposals issued in 2014 included a requirement that developers have at least 50 years’ experience in the Buffalo area. Only one company appeared to meet that requirement – LPCiminelli.

That requirement was later changed to 15 years, with officials maintaining that the 50-year requirement was a typo.The company was still chosen as one of two “preferred developers” in the region.

Ciminelli, his wife and related LLCs have given at least $122,500 to the governor’s campaign committee since 2009. Ciminelli also hosted a fundraiser for Cuomo in Buffalo in November 2013, several weeks before LPCiminelli submitted its proposal to become one of Fort Schuyler’s “preferred developers” in the region.

An 80-page federal complaint, unsealed in September, laid out in detail how LPCiminelli executives allegedly worked with lobbyist Todd Howe and SUNY Polytechnic President Alain Kaloyeros to secretly tailor the Request for Proposals to favor their company. Howe, who is cooperating with federal prosecutors, and Kaloyeros, formerly Gov. Cuomo’s economic development guru, each face an assortment of criminal charges.

Shift in oversight

Cuomo announced in late September, in the wake of state and federal corruption charges, that Empire State Development would take over the SUNY Polytechnic’s economic development projects, which stretch across upstate. They include a film production facility and high-efficiency lighting factory in Syracuse, a chip fabrication plant in Utica, and planned developments in Rensselaer and Rochester, as well as the Buffalo Billion projects.

The transfer of responsibility has left Empire State Development scrambling to sort through the development corporations’ contracts and finances.

“It’s a gigantic concern that no one is in charge here, that ESD does not have its hands around what is going on,” Kaehny said.

Empire State Development had been providing much of SUNY Poly’s funding for economic development projects, but it was the college’s nonprofit real estate arms – which are not subject to the same checks and balances as state agencies – that negotiated contracts and paid vendors.

Still, Fort Schuyler had previously emphasized Empire State Development’s oversight role. A document posted on its website explaining the relationship between the two entities notes that ESD’s involvement “ensures appropriate checks and balances and establishes transparency and accountability.”

ESD officials now say, however, that the agency is currently in “in the process of identifying and assessing the steps necessary to establish ESD’s oversight of projects within SUNY Polytechnic Institute’s economic development portfolio.”

Assemblyman Robin Schimminger said that SUNY Poly’s nonprofit development corporations operated in an “accountability vacuum” and were “virtual petri dishes for corruption.”

“These entities were aimed at ease of operation, getting away from the ordinary checks, the ordinary accountability,” said Schimminger, D-Kenmore. “The governor chose to use them as he proceeded with these projects.”

Empire State Development CEO Howard Zemsky has said that reforms in the way the nonprofits do business will be announced later this month.