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Sunday, February 1, 2009

FBI Agent Pikus Says There is Too Much Secrecy in New York's Capital, and No Accountability

Updated: 02/01/09 10:19 AM
Albany is New York's capital of dysfunction

A look at how the secretive, closed ways of state leadership make accountability elusive

By Tom Precious, Buffalo News

ALBANY — In his 18 years with the FBI, John Pikus (pictured at right) has investigated terrorists, drug dealers, bank robbers, gangs, white-collar criminals and murderers.

Then he ran into the New York State Legislature.

Despite overseeing an office with 80 agents armed with subpoenas and a battery of sophisticated investigatory tools, Pikus sounds almost humbled by the experience he had trying to crack the secrecy that defines the state Capitol.

“The legislative process was almost Byzantine in how it operates,” said Pikus, whose investigators spent three years working on the case that led to last week’s indictments against former Senate Majority Leader Joseph Bruno. “We have very expert investigators working on this. Some have come in from other districts and were quite surprised at how difficult it was to discern what was going on in the legislative process.”

Former New York Senate majority leader Joseph L. Bruno, indicted on corruption charges, enters the federal courthouse in Albany.

[Pikus],The FBI veteran, who cut his teeth doing intelligence work for the U. S. Navy, talked of “significant difficulties” his investigators had “overcoming the lack of transparency in New York State government.”

You might call his experience Exhibit No. 1 against Albany, and to hear senior federal prosecutors openly lament the Kremlin-like atmosphere here was almost heartening to some longtime Albany watchers.

Yet beyond salacious headlines about scandals at the Capitol, there are consequences to the closed ways of Albany that make accountability difficult. For instance:

• Soaring taxes that make New York the nation’s leader in combined state and local tax burden.

• Annual state spending two and three times the rate of inflation that has helped put New York in the fiscal crisis it finds itself in today.

• Rising state debt levels — up more than 30 percent in a recent five-year period — with the debt now equal to each New Yorker owing more than $2,500, double the national rate.

• Businesses, employers and manufacturers fleeing the state long before the recent economic collapse.

• And declining upstate population, led by the 4 percent drop in population in Erie County over the past decade.

In chasing after Bruno, the feds ran into an old Albany problem: Connecting the dots here is no easy task.

“If you read the congressional record, you see virtually everything a legislator says on the floor of Congress is recorded in some fashion,” said acting U. S. Attorney Andrew Baxter (pictured at right). “Our experience with the New York State Legislature is that bills are passed, member items are granted, and it is very difficult to reconstruct which individual senator or Assembly people were actively involved in promoting or casting the legislation or granting those member items.”

Some reform groups welcomed the federal prosecutor to the club of the disenchanted.

“It underscores how New Yorkers feel,” said Blair Horner of the New York Public Interest Research Group. “New Yorkers don’t understand what goes on in Albany either. They just assume the worst, and often their worst fears turn out to be optimistic.

“That’s why the lobbyists love the place so much, because nobody understands it,” Horner said. “It’s like imperial China or the Eastern Roman Empire in Constantinople where the term Byzantine comes from.”

“There’s nothing that scares the political process more than not being in control of information. Secrecy is the mother’s milk of Albany,” added David Grandeau, who chased after wrongdoing for 12 years as the former head of the New York State Lobby Commission.

Secrecy runs the gamut, from how Paterson recently selected a new U. S. senator — he even refused to release blank candidate questionnaires — to what labor or business interests get to meet with legislative leaders.

With so many state officials getting in trouble with the law in recent years, watchdogs see an opportunity to exact meaningful change. Public pressure is one thing. Indictments, lawmakers going to jail, staffers getting fired — they can bring reform, the logic goes. Few are holding their breath.

Behind closed doors

Albany is a town where no deals are made in public.(Below: NYS Assembly)

Even the few open meetings among the governor and legislative leaders are prescripted and occur only after they first meet in secret.

It’s a place where a health union boss sits at the table with leaders to craft bailouts of his industry, where a former staffer of a Rochester lawmaker can kill a bill permitting Buffalo to install cameras at intersections because his lobbying client wants an alternative bill and where modest changes to bolster teen driving safety laws are killed by senators who don’t want to buckle up in the back seat as they are driven home from Albany.

Huge sums of campaign cash flow here as freely as the mini hot dogs at the nightly fundraisers — sometimes as many as a dozen in an evening — that are cloistered in bars, private clubs and hotels within walking distance of the Capitol.

Even some lobbyists, whose top ranks are a powerful collection of former politicians and government officials, concede — though only privately — that the state would be better off if the Legislature returned to the part-time days of citizen legislators. The “permanentization” of the Legislature, as one lobbyist put it, creates its own system, its own industry that costs taxpayers $228 million a year and gets gassed up by special-interest campaign donations.

Most lawmakers have other jobs, including some with companies that directly benefit from the actions they take in Albany. They come to town each January for a session even though most of the major bills that become law don’t even get introduced until June.

Albany’s biggest growth industry is lobbying. There are 5,500 of them representing clients who spend nearly $200 million influencing Albany — not including campaign donations. These lobbyists not only push bills but actually write them for lawmakers.

Matthew Goldstein, chancellor of City University, left, with City Councilman Alan J. Gerson, Mayor Michael R. Bloomberg; Assembly Speaker Sheldon Silver, and the Manhattan borough president, Scott M. Stringer

It’s where all but a handful of lawmakers find themselves pushed to the side on major policies, ceding power to top legislative leaders and Albany’s entrenched “central staff.”

How strong is the staff? In the three weeks since the State Senate has been in session, not a single bill has been approved, in part, because the takeover by Democrats gutted the power of veteran GOP staffers who know how to run the place. A year ago during the same period, the Senate had passed 42 bills.

The inaction, though, hasn’t saved any money; lawmakers and their staffs still come to Albany and collect per diems and travel costs.

And what happened to those top GOP staffers? Many left, making sure to do so before Dec. 31 to take advantage of a loophole — written by staff members — that allowed them to begin lobbying jobs on Jan. 1. (Leaving any later would have kicked in a two-year waiting period.)

Hiding in plain sight

In Albany, rule No. 1 is to control the flow of information. Lawmakers and the governor spend millions each year on publicity efforts — whether it’s a personal photographer for Paterson or state-of-the-art TV broadcast facilities where legislative staff members ask puffy questions of lawmakers to beam back to local stations.

But want to get things unfiltered, say transcripts of legislative floor debates? You can look at the Senate Web site but only if you work for the Senate. On its public Web site, no such transcripts exist.

The state’s exalted Freedom of Information law? In practice, it’s often a tool to deny or delay access to information. Or, increasingly, it’s just ignored. The Buffalo News, for instance, in September filed a FOIL seeking documents on government hiring during a period when a hiring freeze was supposed to be in place. The governor’s office still has not complied.

The real secrecy is in plain sight. Public hearings on major bills are seldom held. A controversial bill, like the budget, is rushed through passage — once the three state leaders agree during their secret meetings — without the legally required three days of waiting so the public and lawmakers can review it. Unlike Congress, there are no public sessions where bills are negotiated and amended.

Want to know what a bill will cost taxpayers? Go to the “fiscal impact section” on a bill memo, where “Unable to Determine at this Time” is often the answer.

Then there was the case of the private actuary used, until last year, by the Assembly; he low-balled cost estimates on bills benefiting union government workers. It turns out the labor unions were footing his tab.

Where to begin to change Albany?

Moving toward change

It must start, reformers say, with redistricting, the mother of all incumbency protection machines. It’s the once-a-decade process that occurs after the census, when legislators redraw state legislative and congressional district lines to take into account population shifts. But the legislators protect the incumbents with party-friendly voters, or at least the favored incumbents.

The next round is just a couple of years away, and critics are calling for an independent body to craft the lines to put an end to districts such as the “earmuff district” for Rep. Louise M. Slaughter that curls from Buffalo to Rochester in search of Democratic voters or a downstate legislative district kept contiguous, as required, by connecting across a sand bar at high tide.

Next, move on to campaign finance and New York’s high donation “limits.” Consider: When new U. S. Sen. Kirsten Gillibrand runs next year, the most an individual is allowed to give her is $4,800 for a primary and general campaign. That’s a federal law.

But, thanks to state law, when Paterson runs, he will be able to take about $55,600 from an individual and a member of the Assembly can accept $7,600. (That doesn’t include party accounts where loopholes sent the limits soaring higher, or other provisions that permit companies to create subsidiaries to skirt limits.)

Watchdogs say Albany needs independent oversight to give a nonpartisan review to everything from the state’s budget numbers to ethics monitoring. Right now, there are two ethics bodies: one oversees the executive branch and the other the Legislature. The governor, though, controls the panel overseeing his executive branch and legislative leaders run the legislative ethics group.

Some, though, think reform isn’t necessary.

Assembly Speaker Sheldon Silver dismissed the broad-brush criticism of the Legislature by the FBI and U. S. attorney.

“I think the two houses are a lot different,” he said.

How? “I think a lot of our materials are much more open,” he said, citing things like sessions now shown on the Internet.

Recent transparency efforts have been modest, at best, critics say. In Albany, “reform” means it’s now public which lawmakers are requesting which pork spending. And lawmakers can no longer be in a bar down the street or driving home while being recorded as in the chamber voting.

But still very much alive is Albany’s systemized unfairness.

Do you live, for instance, in Newfane?

You’ll do well in the pork allotment because you are represented by an Assembly Democrat.

Live across the line in Somerset? Good luck, because your Republican lawmaker will get table scraps.

“The minority members get screwed. Therefore, their constituents get screwed,” Horner said.

In Washington on his second day in office, President Obama ordered his agencies to release more freely information requested under the Freedom of Information law.

“In the face of doubt, openness prevails,” he said.

Paterson, in office nearly a year, has issued no such proclamations.

Grandeau, the former head of the state lobbying commission, offers a gloomy assessment of Albany.

“We have a system now that I think is rife with corruption. But you can’t be sure about it because you can’t get access to the information. But every time you do get a little peek, it’s an ugly picture there,” he said.

Did the FBI uncover any other abuses while chasing Bruno? They won’t say. But a warning did come.

“Notwithstanding the significant difficulties and overcoming the lack of transparency in New York State government, let it be known that the FBI will continue to root out corruption with New York State government to ensure the integrity of the legislative process,” Pikus said.

John Pikus

John Francis Pikus was born in Burlington, New Jersey on June 17, 1955. He is a graduate of Drexel University in Philadelphia, Pennsylvania, where he earned a Bachelor of Science Degree in Political Science in June 1978. He went on to earn his Master of Arts Degree in International Relations/Russian Studies from Syracuse University in May 1980.

Mr. Pikus was commissioned as a U.S. Naval Officer following completion of the Navy's Aviation Officer Candidate's School in February 1981. He served almost ten years on active duty as an Naval Intelligence Officer, during which time he completed two overseas deployments, served as an instructor in electronic warfare, and was assigned as the Command Intelligence Briefer for the Commander-in-Chief, Pacific Fleet. Mr. Pikus ultimately achieved the rank of Lieutenant Commander prior to his discharge from active and reserve duty in January 1990. Mr. Pikus was sworn in as a Special Agent of the FBI in February 1990.

Mr. Pikus began his FBI career in the Honolulu Division where he was assigned white collar, foreign counterintelligence, gang and violent crime investigations. Mr. Pikus was a member of both the SWAT and Evidence Response Teams, and served as the Division's media representative. In October 1996, he was promoted to supervisor of the Division's gang and violent crime squad where he served in this capacity until his transfer to FBI Headquarters in May 1999.

Mr. Pikus was assigned to the FBI Headquarter's Drug Section from May 1999 to June 2000. He was subsequently reassigned to the FBI's Inspection Division as an Assistant Inspector and Unit Chief until December 2001. In January 2002, Mr. Pikus reported to the FBI's Sacramento Division, having been promoted to the position of Assistant Special Agent in Charge. During his tenure in Sacramento, Mr. Pikus coordinated investigations in all areas of the FBI's jurisdictional responsibilities, to include terrorism, foreign counterintelligence, cybercrime, and white collar crime matters.

In February 2004, Mr. Pikus was promoted to Section Chief of the Executive Development and Selection Program, where he had responsibility for the FBI's Agent and Support Career Development Program. In January 2005, Mr. Pikus was promoted to Inspector in the Inspection Division where he served until his promotion to the position of SAC, Albany in July 2006. On July 17, 2006, Mr. Pikus assumed the duties of the SAC of the Albany Division.

Mr. Pikus has been married for sixteen years. He and his wife, Frances, have three children.

Department of Justice Press Release on Bruno Investigation:

Andrew Baxter, Acting U.S. Attorney, is seen during a news conference, Friday, Jan. 23, 2009 at the Federal Courthouse in Albany, New York. Joseph Bruno, the former majority leader of the New York Senate and for a time the most powerful Republican in state politics, was indicted Friday on federal corruption charges

ALBANY, N.Y. — A federal grand jury in Albany returned an indictment today against Joseph L. Bruno, the former majority leader of the New York State Senate, Acting U. S. Attorney Andrew T. Baxter and Special Agent in Charge John F. Pikus of the Albany Division of the FBI announced. Bruno is charged with carrying out a scheme to defraud the State of New York and its citizens of the right to his honest services by soliciting private business from, and entering into direct and indirect financial relationships with, persons or entities who were pursuing interests before the New York State legislature or other state agencies.

The indictment alleges further that Bruno concealed and failed to disclose the existence and nature of such financial relationships, and resulting conflicts of interest, while taking discretionary official actions benefitting parties with whom he had those relationships.

The charges arise from Bruno’s alleged receipt of almost $3.2 million from five groups of individuals and related entities, either directly or through so-called consulting companies, between 1993 and 2006. While New York state legislators are part-time officials permitted to pursue other employment or business activities, the indictment alleges that Bruno improperly exploited his official position and concealed conflicts of interest, contrary to state ethics and reporting laws, with respect to his private “consulting” business.

According to the indictment, Bruno received approximately $2 million from two financial services firms. These payments were essentially fees relating to labor union benefit funds that invested or conducted brokerage transactions with the firms, ostensibly as a result of referrals by Bruno. The unions, whose benefit funds were solicited by Bruno, had frequent business before the New York State legislature and other state agencies, and Bruno took discretionary official actions benefitting the unions. The union officials solicited by Bruno were responsive to his “business” proposals because of his official position and his perceived ability to influence legislative or other state actions on behalf of their unions. In required financial disclosure statements, and in other contexts, Bruno concealed the fact that he enriched himself by exploiting relationships with unions that benefitted from his official actions. For example, rather than reporting that he was paid for soliciting union benefit funds, Bruno misleadingly reported most of his income as fees for “consulting.”

Bruno was also paid approximately $1.2 million in “consulting” fees by three individuals and a myriad of related entities. Some of those entities had interests before the New York State legislature and other state agencies, and several benefitted from official acts of Bruno. According to the indictment, Bruno did not perform legitimate work commensurate with these substantial “consulting fees”, which were, in essence, gifts from these individuals or related entities. Bruno failed to report these payments as gifts, as required under state ethics and reporting laws. Bruno also misrepresented to two of these “consulting” clients that he had received clearance from the Legislative Ethics Committee to receive payments from them when, in fact, Bruno had never sought ethics opinions relating to these particular outside activities.

An indictment is merely an accusation and defendant Joseph. L. Bruno is presumed innocent unless and until proven guilty. None of the other persons or entities identified in the indictment have been accused of federal criminal violations. If convicted, Bruno faces a maximum sentence of up to 20 years in prison and fines of up to $250,000 on each of the indictment’s eight counts under the federal wire and mail fraud statutes. Bruno was arraigned earlier this afternoon before U.S. Magistrate Judge David R. Homer in Albany.

Acting U. S. Attorney Baxter stated: “As the Senate Majority Leader, Joseph L. Bruno had a fiduciary relationship with the State of New York and its citizens requiring disinterested decision-making and candid disclosure of the potential motivation behind his official acts. Mr. Bruno exploited his office by concealing the nature and source of substantial payments that he received from parties that benefitted from his official actions and the resulting conflicts of interest. This investigation and prosecution demonstrates the commitment of federal law enforcement in the Northern District of New York to strive to ensure that public officials who breach their public trust will be held accountable.”

Special Agent in Charge Pikus stated: “This complicated investigation has been conducted in a professional and thorough fashion, notwithstanding the significant difficulties in overcoming the lack of transparency in New York State government. The FBI will continue to root out public corruption within New York State government to ensure the integrity of the legislative process.”

Daniel R. Petrole, Deputy Inspector General, U.S. Department of Labor, stated: “Former State Sen. Joseph L. Bruno allegedly used his powerful position improperly to induce union officials to invest their organizations’ pension plan funds through several investment companies in return for just under $2 million. I’d like to thank our law enforcement partners at the FBI and the U.S. Attorney's Office for working with us to ensure that corruption at all levels will be thoroughly investigated and aggressively prosecuted.”

The investigation that led to this indictment was conducted by the Albany Division of the FBI, with the assistance of the Inspector General of the U.S. Department of Labor, and the Criminal Investigation Division of the Internal Revenue Service. The United States is represented in this prosecution by Assistant U. S. Attorneys Elizabeth C. Coombe and William C. Pericak.

Former N.Y. Senate Majority Leader Indicted
By Michael Hill, Associated Press
Saturday, January 24, 2009; A02

ALBANY, N.Y. -- Joseph L. Bruno, the former majority leader of the New York Senate and for a time the most powerful Republican in state politics, was indicted Friday on federal corruption charges.

Bruno, who retired from the legislature in July after more than a dozen years leading the Senate, is accused of using his position to steer contracts and grants to businesses that paid him a total of $3.2 million in consulting fees or other compensation from 1993 through 2006.

Bruno exploited "his official position for personal compensation and enrichment" in dealing with companies and 16 unions with business before the state, according to the eight-count indictment brought by the U.S. attorney for the Northern District of New York.

None of the companies or unions mentioned in the indictment are accused of wrongdoing.

Bruno also is accused of lying on financial disclosure forms and of using state employees to do administrative and other work related to his outside financial activities.

Bruno, 79, pleaded not guilty during a brief court appearance Friday. He later denounced the investigation at a news conference, calling it a politically motivated "fishing expedition."

"After being hounded for three years, I am being indicted on a prosecutorial sleight of hand because, after years of effort, they cannot find one example of criminal activity or illegal intent," Bruno said.

He promised to "fight this, and I'm going to win."

Bruno, who represented his Troy, N.Y., district for 32 years, seized power in the state Senate in 1994 with the consent of former GOP governor George E. Pataki, who had just been elected. Bruno became the most powerful Republican in state government when former governor Eliot L. Spitzer (D) succeeded Pataki.

After his retirement, Bruno became chief executive of CMA Consulting Services, an information technology consulting business based in the Albany County suburb of Latham.