Sunday, May 31, 2015

Atlantic Yards, Pacific Park, and the Culture of Cheating

I offer a framework to analyze and evaluate Atlantic Yards (in August 2014 rebranded as Pacific Park Brooklyn) and the Barclays Center: Atlantic Yards, Pacific Park, and the Culture of Cheating.

Note: this post is post-dated to remain at the top of the page. Please send tips to the email address above, rather than posting a comment here.

model shown to potential immigrant investors in China in 2014,
though not shown publicly in Brooklyn.

Sunday, May 24, 2015

From the latest Atlantic Yards/Pacific Park Construction Alert: continued night work May 26-June 1 at Atlantic/Sixth

Beyond the intriguing admission about interior work in the B2 modular tower, the Atlantic Yards/Pacific Park Construction Update for the two weeks beginning tomorrow, May 25, contains several descriptions of new work planned, notably continued night work Tuesday May 26 through Monday June 1 at the intersection of Atlantic Avenue and Sixth Avenue.

Unlike in the previous two-week alert, there is no mention of "directional lighting" or equipment like excavators, cranes, and hoe rams, with the installation of portable fences with acoustic blanket linings to help dampen the sound.

Note that, as of February, Forest City Ratner's CEO said no overnight work was planned. That was not exactly reliable.

(The document was issued Friday. Such an early issuance is unusual, given that the updates usually emerge one or after the date.)

The document, using asterisks and red type, distinguishes new work from ongoing work. Among the new work.

Atlantic Avenue and 6th Avenue Intersection

During the overnight hours in this reporting period:
• *May 26th through May 29th:
o 6th Avenue will be closed from Pacific Street to Atlantic Avenue (6th Ave Bridge) to allow for required work to be completed at the intersection Atlantic and 6th.
 This section of the road will be closed for the duration of this period.
 There will be no pedestrian access on 6th Avenue between Pacific and the north side of Atlantic Avenue during the period referenced above.
 Flagmen and/or TEAs will be posted at the intersections to help direct traffic and pedestrians.
 Work will occur during day and night hours during this period.
 Work during this period will include the setting of Main Steel Girder along the LIRR
Tunnel and installation of Temporary Road Decking across 6th Avenue as well as continuation of the mini pile and tie down anchors in the intersection.
• *May 29th at 10:00 pm through June 1st at 6:00 am:
o 6th Avenue will be closed from Pacific Street to Atlantic Avenue (6th Ave Bridge) and there will be varying lane closures on Atlantic Avenue throughout the weekend to allow for temporary repaving of the Atlantic Ave and 6th Ave intersection.
Green roof work at Barclays Center
  • *The Flatbush Avenue crane was assembled the weekend of May 16-17. It will be needed for approximately 2 to 4 weeks (depending on weather conditions), after which it will be disassembled.
  • *Deliveries to the Flatbush Avenue crane location continue during this reporting period. Trucks will travel northbound on Flatbush Avenue past the crane site and back into the fenced area to the lifting zone. Flagmen will be present as needed.
B11 – 550 Vanderbilt Avenue:
During this reporting period:

• *Con Ed is scheduled to commence bringing additional electric power into a property manhole located within the site on Dean Street.
• *Additional Plexi-glass panels will be installed on the site fence at the corner of Vanderbilt and Dean Streets per FDNY direction to improve visibility.

Who knew? At B2 tower, "limited interior work" now planned on modules (presumably delivered complete)

Need for interior work?
An intriguing admission emerged in the Atlantic Yards/Pacific Park Construction Update for the two weeks beginning May 25, a document issued Friday (bottom).

Regarding the B2 modular tower at Dean Street, and Flatbush Avenue, the document states:
  • Work related to the erection of modules for floors 11, 12, and 13 is continuing during this reporting period. 
  • Limited interior work will begin on modules that have already been installed. 
No such "limited interior work" has been ever announced previously; after all, the point of modular construction is to deliver completed modules to the site.

The photo above sent by a reader seems to show that ceilings inside some modules have missing or removed panels.

By contrast, "mechanical, plumbing and electrical mate line work"--connecting the modules so they can be part of the finished building--has been announced several times.

Saturday, May 23, 2015

Attention (some) project neighbors: double-paned windows and air conditioners available to dampen noise

Just three days after the question of how much Atlantic Yards/Pacific Park neighbors had been informed of the requirement that they be offered double-paned windows and air conditioners for noise attenuation, new notices were distributed yesterday.

I spotted the notices yesterday posted on Dean Street properties between Carlton and Vanderbilt avenues, and on Vanderbilt Avenue between Dean and Pacific street.

(A residents adds that they were also placed on Dean Street between Sixth and Carlton Avenue, in part, and on Vanderbilt from Dean to Bergen, in part, and on Carlton Avenue from Dean to Bergen, in part. They were not visible on Carlton Avenue from Pacific to Dean, right opposite the project site.. That's a prime area, so it's possible the neighbors were informed already, or via other means.)

Updating the list

The issue came up May 19 at the meeting of the Atlantic Yards Community Development Corporation (AY CDC)n, where directors were told by Forest City Ratner executive Jane Marshall that the developer was updating a tracking list created in 2007 to reach out to neighbors.

At the meeting, resident Peter Krashes said some residents had received a letter regarding potential noise mitigation late--two or three months after the groundbreaking last December for the B15 tower at Carlton and Dean, and it was “dated to the point of the groundbreaking.”

The new letters come well after construction activities started on the southeast block of the project site, bounded by Dean and Pacific streets, and Carlton and Vanderbilt avenues.
At the meeting, Krashes asked Empire State Development (ESD), the state agency overseeing/shepherding the project (and the parent of the advisory AY CDC) if the developer met the required terms regarding public notice to residents about the noise attenuation mitigations, and if there was a penalty.

Empire State Development official Rachel Shatz said ESD would review Forest City’s recordkeeping, so she couldn’t yet comment on compliance.

Deja vu: another truck violates truck route, drives through residential street

On Dean Street east of Sixth Avenue
This past Tuesday, 5/19/15, on the same day that an Empire State Development representative reported that the number of complaints regarding Atlantic Yards impactrs had been decreasing, a report on Atlantic Yards Watch documented a truck ignoring the required truck route.

The same thing happened yesterday, again documented on Atlantic Yards Watch.

The truck, which had delivered a module to the B2 modular tower on Dean Street just east of Flatbush Avenue, was supposed to turn left on Sixth Avenue.

Instead, it continued on Dean Street through the residential neighborhood, violating the requirement to use the truck route.

Potential violations

These seem to be clear violations.

According to the New York City Department of Transportation, the failure to use the local truck route leads to a violation, as designated in Section 4-13 of the New York City Tra ffic Rules.Here's advice from a trucker web site:
Very important that for all new truckers and for some occasionals, that you make sure you only use designated TRUCK ROUTES. You are to use these roads to get as close as possible to your destination, then you can get off and finish your trip.If you are caught being OFF TRUCK ROUTE, you will be fined $250 plus 2 points on your license. Second and third offenses $500 and $1000 with 2 more points each time.
Promises to avoid such violations

Such violations are not supposed to happen. According to the Second Amended Memorandum of Environmental Commitments (MEC), which documents an agreement between the developer (then Forest City Ratner, now Greenland Forest City Partners) and Empire State Development (ESD), the state agency overseeing/shepherding the project:
Truck deliveries shall be scheduled, and untimely deliveries shall, in general, be turned away or reassigned with different delivery times. Trucks shall be required to use NYCDOT-designated truck routes for traveling to and from the construction site, which include primarily Atlantic Avenue, Flatbush Avenue, 4th Avenue, and the Brooklyn-Queens Expressway except as required for movement between staging and construction areas
The document says that Forest City is supposed to check regularly for non-compliance with the truck protocol requirements concerning idling and/or queuing, and to tell ESD about repeat violators, which can be warned, sanctioned or banned.

The document states:
Maps that identify acceptable routing of trucks to and from the Project site shall be provided to all contractors as part of the MEC training program. FCRC or its contractors shall take measures to ensure that the trucks follow such routes. Among other things, contractors shall be directed to provide those maps to their subcontractors, and require that the maps be distributed to drivers and kept available for reference in the cabs at all times. 
But there's no apparent sanction on the developer--or the companies/drivers--for these truck route violations. That seems to be a significant gap.

Friday, May 22, 2015

As of February, disruptive night work was not planned, but guess what: schedule creep (and overnight noise)

So there's been noisy, disruptive night work at the Vanderbilt Yard for the past week or so, and it's keeping residents from the Newswalk condo and others nearest the the site from sleeping, I've been told.

The work was disclosed in the most recent Construction Update, and surely proceeds under permit.

But it also proceeds from a typical Forest City Ratner strategy of incomplete candor. Consider my coverage of the 2/16/15 first meeting of the Atlantic Yards Community Development Corporation, set up in part to monitor project impacts.

Resident Wayne Bailey of Newswalk, which is adjacent to the Vanderbilt Yard, asked Forest City CEO MaryAnne Gilmartin if there would be nighttime work at the railyard.

"Right now we're not planning on it," Gilmartin said, though she acknowledged "schedule creep" could provoke such work. "If there is a plan, we need to get out early and explain why."

They didn't explain why, actually. The shorthand Construction Update simply described, but didn't explain. And surely they were planning, at least for the contingency.

I wrote four years ago that anticipate it does not, to Forest City Ratner, mean foresee, but rather "the placeholder date we don't believe but think we can get away with." Similarly, not planning apparently means "we may be planning but won't admit it publicly."

Below is the summary from meeting minutes.

My Newsday op-ed: Nassau must be wary about plans for Coliseum

My op-ed in Friday's Newsday is headlined Nassau must be wary about plans for Coliseum. The message--hardly radical--is that Bruce Ratner's record is worthy of scrutiny.

Consider one episode that didn't make the piece, as I wrote last September, regarding the split between Forest City and former partner Skanska. An affidavit from Skanksa's Richard Kennedy detailed an increasingly contentious relationship regarding blame for the delay in producing modules:
In early 2014, Skanska Building attempted to engage in constructive conversations with Forest City to resolve issues. Forest City's responses ranged from hostile to inattentive and accusatory. For example, at a meeting on January 28, 2014 when William Flemming, the President of Skanska Building, mentioned that design issues existed, Bruce Ratner's response was to use a vulgar street epithet followed by "I don't care if it costs you fifty million to finish the project ... I'll see you at the grand opening."
No wonder I wrote in Newsday, "The developer seems affable, but former partners portray him as cutthroat."

Yes, as some commenters, including Nassau County Executive Ed Mangano, inevitably point out, Newsday can be accused of animus to Ratner, because its parent company also owns Madison Square Garden, which lost out on the Nassau Coliseum renovation. 

But it was the New York Times, for example, in a news story, that cited Ratner's "reputation for promising anything to get a deal, only to renegotiate relentlessly for more favorable terms."

Thursday, May 21, 2015

Forest City: 550 Vanderbilt condo sales office to launch in June at Barclays Center space (+ Gilmartin says BK's overheated)

The Real Deal reported today, in Forest City’s Gilmartin: Queens and the Bronx are where it’s at:
“Brooklyn might be a little overheated for us,” Gilmartin said Wednesday at the Honest Buildings Real Estate Innovation Summit, held at 7 World Trade Center. She added that real estate prices in Brooklyn have gotten “out of control.”
Forest City is co-developing the Pacific Park residential project in Brooklyn with China’s Greenland Group, and Gilmartin said she still likes Brooklyn neighborhoods such as Gowanus. But she sees greater potential in two other boroughs.
 “I think the future is probably Queens, to be honest,” she said. “If I had enormous amounts of cash to invest, I would pick up properties in Queens and the Bronx.”
Launching condo sales

The most interesting nugget came at the end, regarding the 550 Vanderbilt Avenue condo building: sales will launch in June out of a sales office in the Barclays Center, according to Gilmartin. (Studios will start at $550,000.)

In other words, they'll redeploy some retail space.

(Note that there is already a sales office in Shanghai.)

"If you ain't cheating, you ain't trying": Barclays pays $2.4 billion for manipulating foreign exchange market

So the "Barclays Center" has a nice ring to it, right?

Well, the bank behind the name has long been tinged by scandal, including a $450 million fine related to LIBOR (London interbank offered rate) manipulations, and a bank-commissioned review that described an "at all costs" attitude.

Now comes even more damning evidence, thanks to federal and state investigators, describing a $2.4 billion penalty related to a scheme to manipulate spot trading in the foreign exchange (FX) market.
And this reminds us of Michael D.D. White's prescient observation, back in August 2012, "I hope future New York Times sports articles start referring regularly to the Ratner/Prokhorov arena as the 'problematically-named Barclays Center' or something else of informative ilk."

The $2.4 billion includes payments of $485 million to the New York State Department of Financial Services, $400 million to the Commodities Futures Trading Commission, $710 million to the U.S. Department of Justice, $342 million to the Federal Reserve, and 284 million GBP (approximately $441 million) to the United Kingdom’s Financial Conduct Authority.
See top left of today's New York Times front page

As stated by New York State's Department of Financial Services (DFS):
Indeed, in a fair and functioning economic market, a business takes on risk in the hopes of earning a profit. However, Barclays’ traders coordinated with other banks to help remove that risk and instead just take profits at the expense of their clients. In other words, it was a “heads I win, tails you lose” trading system for Barclays.
Also noted by DFS:
As the future Co-Head of UK FX Hedge Fund Sales (who was then a Vice President in the New York Branch) wrote in a November 5, 2010 chat: “markup is making sure you make the right decision on price . . . which is whats the worst price i can put on this where the customers decision to trade with me or give me future business doesn’t change . . . if you aint cheating, you aint trying.”
(Emphases in original)

Other banks involved

Barclays was not alone. As reported by Reuters, Global banks admit guilt in forex probe, fined nearly $6 billion:
Citigroup Inc, JPMorgan Chase & Co, Barclays Plc, UBS AG and Royal Bank of Scotland Plc were accused by U.S. and UK officials of brazenly cheating clients to boost their own profits using invitation-only chat rooms and coded language to coordinate their trades.
The New York Times reported, Rigging of Foreign Exchange Market Makes Felons of Top Banks:
In announcing the cases, the Justice Department emphasized that the banks’ parent companies entered the guilty pleas rather than a subsidiary, representing a new frontier in efforts to punish Wall Street misdeeds.
The New York DFS press release, below, in full [emphases in original]
Barclays Employee: “if you aint cheating, you aint trying”
Barclays FX Trader “[Y]es, the less competition the better”
NYDFS to Continue Its Investigation into Electronic FX Trading
Benjamin M. Lawsky, Superintendent of Financial Services, today announced that Barclays will pay $2.4 billion and is terminating eight additional Bank employees who engaged in misconduct for New York Banking Law violations in connection with its scheme to manipulate spot trading in the foreign exchange (FX) market. The overall $2.4 billion penalty Barclays will pay includes $485 million to the New York State Department of Financial Services (NYDFS), $400 million to the Commodities Futures Trading Commission (CFTC), $710 million to the U.S. Department of Justice (DOJ), $342 million to the Federal Reserve, and 284 million GBP (approximately $441 million) to the United Kingdom’s Financial Conduct Authority (FCA). 
Today's NYDFS order concerning Barclays, however, does not release the Bank from any claims concerning electronic systems used in FX trading and electronic trading of FX and FX-related products. The Department will continue its investigation of these areas of activity.

Superintendent Lawsky said: “Put simply, Barclays employees helped rig the foreign exchange market. They engaged in a brazen ‘heads I win, tails you lose’ scheme to rip off their clients. While today's action concerns misconduct in spot trading, there is additional work ahead. The Department's investigation of electronic foreign exchange trading – which makes up the vast majority of transactions in this market – will continue.” 
Heads I Win, Tails You Lose FX Trading

A typical FX spot transaction involves the exchange of currencies at an agreed rate for settlement on a spot date—usually two business days from the trade date. In addition to trading directly in the market, clients can also submit “fix” orders to various large international banks, including Barclays, which then shoulder the risk of the trade and agree to deliver the requested currency to the client at the “fix” rate, which is determined at a subsequent time based on trading in the interdealer market.

Prior to a fix, clients place orders with banks (including Barclays) to buy or sell a specified amount of currency “at the fix rate”—i.e., the rate that would be determined at the upcoming fix. Traders with net orders to sell a certain currency at the fix rate make a profit if the average rate at which they buy the currency is lower than the fix rate at which they sell to their clients, while traders with net orders to buy a certain currency at the fix rate make a profit if the average rate at which they sell the currency is higher than the fix rate at which they buy from their clients.

Indeed, in a fair and functioning economic market, a business takes on risk in the hopes of earning a profit. However, Barclays’ traders coordinated with other banks to help remove that risk and instead just take profits at the expense of their clients. In other words, it was a “heads I win, tails you lose” trading system for Barclays.
From approximately 2008 through 2012, certain FX traders at Barclays communicated with FX traders at other banks to coordinate attempts to manipulate prices in certain FX currency pairs and certain FX benchmark rates, including the WM/R and ECB fixes. The majority of these communications took place in multi-bank online chat rooms.

Certain FX traders at Barclays routinely participated in these multi-bank chat rooms and often had multiple chat rooms open at the same time. In their attempts to manipulate these benchmarks in the chat rooms, Barclays FX traders exchanged information about the size and direction of their orders with FX traders at other banks, as well as coordinated trading, and discussed the spread between bids and offers which the banks were showing to customers. The exchange of information among the traders at multiple banks via the use of chat rooms facilitated this type of conduct.

One particular chat room, referred to as the “Cartel” included FX traders from Citigroup, JP Morgan, UBS, RBS and Barclays who specialized in trading the Euro. Membership in this exclusive chat room was available by invitation only. Two Barclays EUR/USD traders were members of this chat room: one from December 2007 to July 2011 and another from December 2011 to August 2012. One Barclays FX trader, when he became the main Euro trader for Barclays in 2011, was desperate to be invited to join the Cartel because of the trading advantages from sharing information with the other main traders of the Euro. After extensive discussion of whether or not this trader “would add value” to the Cartel, he was invited to join for a “1 month trial,” but was advised “mess this up and sleep with one eye open at night.” This trader ultimately survived his “trial” and was permitted to remain in the Cartel chat room until it was disbanded at some point in 2012.

FX traders at Barclays employed various strategies in their efforts to manipulate the fixes. One method was known as “building ammo,” whereby a single trader would amass a large position in a currency and then unload the “ammo” just before or during the fix to try to move prices.

On January 6, 2012, one Barclays trader, who was also a Head of the FX Spot desk in London, attempted to manipulate the ECB fix by unloading EUR 500 million right at the fix time, stating in the Cartel chat room “i saved 500 for last second” and in another chat room “i had 500 to jam it."

Without the active cooperation and coordination among the traders at multiple banks, via the use of chat rooms, the Barclays trader would have had neither the information to indicate that pushing the price was feasible, since there were not large contrary orders pending, nor the tools to attempt to accomplish that forced, temporary push lower.

An additional tactic for reducing the risks involved in seeking to manipulate market prices was for the traders at the various banks on a multi-bank chat to agree to stay out of each other’s way around the time of a fix, and avoid executing contrary orders while an effort to push prices was being deployed. Traders would also cooperate with price manipulation efforts by seeking to “clear the decks” of contrary orders early, in order not to dilute the deployment of the full “ammo” nearer to the fix, as part of an effort to move prices beyond the narrower range that would be maintained by a more routine, even execution of orders.

For example, in a June 28, 2011 chat with a trader from HSBC, a Barclays trader reported that another trader was building orders to execute at the fix contrary to HSBC’s orders but Barclays assisted HSBC by executing trades ahead of the fix to decrease that other trader’s orders: “He paid me for 186 . . . so shioud have giot rid of main buyer for u.”

In another discussion on a multi-bank chat, on December 1, 2011, with a trader from Citigroup, a Barclays trader indicated “If u bigger. He will step out of the way. . . We gonna help u.

FX traders involved in the USD/Brazilian Real market colluded together to manipulate markets in a more straightforward manner—by agreeing to boycott local brokers to drive down competition. On October 28, 2009, an RBC trader wrote “everybody is in agreement in not accepting a local player as a broker?” A Barclays FX trader responded “yes, the less competition the better.”

Additional Efforts to Cheat Barclays Clients

On numerous occasions, from at least 2008 to 2014, Barclays employees on the FX Sales team engaged in misleading sales practices with clients. Sales employees applied “hard mark-ups” to the prices that traders gave them without their clients’ knowledge. A hard mark-up represents the difference between the price the trader gives a salesperson and the price the salesperson shows to the client.

FX Sales employees would determine the appropriate mark-up by calculating the most advantageous rate for Barclays that did not cause the client to question whether executing the transaction with the Bank was a good idea, based on the relationship with the client, recent pricing history, client expectations and other factors.

As one FX Sales employee wrote in a chat to an employee at another bank on December 30, 2009, “hard mark up is key . . . but i was taught early . . . u dont have clients . . . u dont make money . . . so dont be stupid.”

The practice of certain FX Sales Employees when a client called for a price quote was to mute the telephone line when asking the trader for a price, which would allow Sales employees to add mark-up without the client’s knowledge.

Mark-ups represented a key revenue source for Barclays and generating mark-ups was a high priority for Sales managers. As the future Co-Head of UK FX Hedge Fund Sales (who was then a Vice President in the New York Branch) wrote in a November 5, 2010 chat: “markup is making sure you make the right decision on price . . . which is whats the worst price i can put on this where the customers decision to trade with me or give me future business doesn’t change . . . if you aint cheating, you aint trying.”

On June 26, 2009, after one FX Sales employee appeared to admit to another Sales employee that he “came clean” about charging a hard mark-up after a client called him out on it, the second employee stated “i wouldnt normally admit to clients if you pip them. i think saying you rounded is fine.” The first employee agreed, and replied that he didn’t actually come clean to the client, but rather “said i was rounding.”

On September 23, 2014, another FX Sales employee applied a mark-up to a client’s trade. The client called and asked if had applied a mark-up, and this Sales employee lied and said that he had not.

Another misleading sales practice was giving a client the worst (or a worse) rate that was reached during a particular time interval, even if the trader was able to execute the order at a better price. The more favorable fill generated a profit, which Barclays would keep, in whole or in part, without providing disclosure to the client.

A similar practice was to tell clients that their orders had been only partially filled, when in fact the FX Sales employees were holding back a portion of the fill as the market moved in Barclays’ favor, permitting Barclays to generate an undisclosed profit at the client’s expense.

Failures of Controls and Compliance

The misconduct at the Bank was systemic and involved various levels of employees, including a lack of appropriate supervision or intervention by certain managers both of FX trading desks and of FX Sales staff.

The culture within the Bank valued increased profits with little regard to the integrity of the market. In May 2012, after noting that “Large fixes are the key to making money as we have more chance of moving the market our way,” a Barclays senior trader announced an “added incentive” for Sales employees of 50% of profits made for increasing trading volume at certain fix orders. In response, the head of the FX Spot desk in New York noted that “the ideas put forward in this mail are exactly what we are looking for.” The revenue produced by an FX trader’s trading activity impacted the compensation of FX traders, along with other factors.

During the relevant time period, although Barclays had general policies in place regarding trading and sales activity, those policies were not specifically designed for the FX business. The guidance Barclays did provide focused on insider trading risk and regulations that were not relevant to the foreign exchange market, which effectively left it up to individual traders to determine what kind of conduct was appropriate.

Warning signs alerted the Bank to weaknesses in its controls with respect to the FX business, but the Bank failed to take appropriate action. Although the Bank took steps, beginning in mid-2012, to address certain risks associated with the use of multi-bank chat rooms, it did not investigate the conduct that occurred in such chat rooms until mid-2013.

Specifically, in March 2012, Barclays discovered that an employee on the Sales desk had revealed, on one of his Reuters distribution lists, confidential information about an FX trade that had been executed by a Barclays client.

Barclays' initial response to this incident was to conduct a review that identified who had leaked the confidential information. Thereafter, the Bank performed an additional review of the chats of only one trader who has now been identified as having engaged in some of the trading misconduct described in this Order. This additional review was assigned to a single Barclays employee in the Compliance division.

The Compliance employee who reviewed the chats looked only for confidential client information sharing, derogatory references to clients and bad language, but failed to discover any of the efforts to manipulate the benchmark rates described above.

In May 2012, the Bank held workshops with FX traders and FX sales personnel to discuss market color and confidential information sharing. At one of these workshops, traders discussed their efforts to coordinate the FX fixes. During and following these workshops, traders asked for guidance from the Compliance and Legal divisions about proper communications in the multi-bank chat rooms, but never received the requested guidance until October and December 2012.

Around the same time that certain FX traders raised concerns to Compliance about information sharing regarding and efforts to coordinate FX fixes in multi-bank chats, Barclays entered into a global settlement relating to the manipulation of other key benchmark rates, most notably the London Interbank Offered Rate (“LIBOR”). The LIBOR settlements took place on June 27, 2012.

Despite learning about FX traders’ information sharing in chat rooms at least as early as May 2012 while simultaneously entering into a settlement concerning persistent misconduct relating to the manipulation of key benchmark rates, which included misconduct by traders in chat rooms, Barclays did not shut down the use of interbank chat rooms by FX traders until October 2012 and by other lines of business until 2013. Further, Barclays did not begin a full investigation of FX trading misconduct until the publication of a Bloomberg article in June 2013.

Employee Discipline

A number of Barclays employees that were involved in the wrongful conduct discussed in this Order, including a director on the FX Spot trading desk in London, a director on the FX Spot trading desk in New York, a director on the Emerging Markets desk in New York, a managing director in FX Hedge Fund Sales in New York, a director in FX Real Money Sales in New York, and an assistant vice president in FX Hedge Fund Sales in London, are no longer employed at the Bank.

As a result of the investigation, four Barclays employees have been terminated in the last month: the Global Head of FX Spot trading in London, an assistant vice president on the FX Spot trading desk in London, a director on the FX Spot trading desk in London and a director on the FX Spot trading desk in New York.

Certain employees involved in the wrongful conduct have been suspended or placed on paid leave but remain employed by the Bank. The Department orders the Bank to take all steps necessary to terminate the following four employees, who played a role in the misconduct discussed in this Consent Order but who remain employed by the Bank: a vice president on the Emerging Markets trading desk in New York, two directors on the FX Spot trading desk in New York and a director on the FX Sales desk in New York (who previously was Co-Head of UK FX Hedge Fund Sales in London).
To view a copy of today's NYDFS order regarding Barclays, please visit, link.

Department of Justice press release
Five Major Banks Agree to Parent-Level Guilty Pleas

Five major banks – Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland plc and UBS AG – have agreed to plead guilty to felony charges. Citicorp, JPMorgan Chase & Co., Barclays PLC, and The Royal Bank of Scotland plc have agreed to plead guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange (FX) spot market and the banks have agreed to pay criminal fines totaling more than $2.5 billion. A fifth bank, UBS AG, has agreed to plead guilty to manipulating the London Interbank Offered Rate (LIBOR) and other benchmark interest rates and pay a $203 million criminal penalty, after breaching its December 2012 non-prosecution agreement resolving the LIBOR investigation.
Attorney General Loretta E. Lynch, Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office and Director Aitan Goelman of the Commodity Futures Trading Commission’s Division made the announcement.

“Today’s historic resolutions are the latest in our ongoing efforts to investigate and prosecute financial crimes, and they serve as a stark reminder that this Department of Justice intends to vigorously prosecute all those who tilt the economic system in their favor; who subvert our marketplaces; and who enrich themselves at the expense of American consumers,” said Attorney General Lynch. “The penalty these banks will now pay is fitting considering the long-running and egregious nature of their anticompetitive conduct. It is commensurate with the pervasive harm done. And it should deter competitors in the future from chasing profits without regard to fairness, to the law, or to the public welfare.”
“The charged conspiracy fixed the U.S. dollar – euro exchange rate, affecting currencies that are at the heart of international commerce and undermining the integrity and the competitiveness of foreign currency exchange markets which account for hundreds of billions of dollars worth of transactions every day,” said Assistant Attorney General Baer. “The seriousness of the crime warrants the parent-level guilty pleas by Citicorp, Barclays, JPMorgan and RBS.”
“The five parent-level guilty pleas that the department is announcing today communicate loud and clear that we will hold financial institutions accountable for criminal misconduct,” said Assistant Attorney General Caldwell. “And we will enforce the agreements that we enter into with corporations. If appropriate and proportional to the misconduct and the company’s track record, we will tear up an NPA or a DPA and prosecute the offending company.” 
“These resolutions make clear that the U.S. Government will not tolerate criminal behavior in any sector of the financial markets,” said Assistant Director in Charge McCabe. “This investigation represents another step in the FBI’s ongoing efforts to find and stop those responsible for complex financial schemes for their own personal benefit. I commend the special agents, forensic accountants, and analysts, as well as the prosecutors for the significant time and resources they committed to investigating this case.” 
According to plea agreements to be filed in the District of Connecticut, between December 2007 and January 2013, euro-dollar traders at Citicorp, JPMorgan, Barclays and RBS – self-described members of “The Cartel” – used an exclusive electronic chat room and coded language to manipulate benchmark exchange rates. Those rates are set through, among other ways, two major daily “fixes,” the 1:15 p.m. European Central Bank fix and the 4:00 p.m. World Markets/Reuters fix. Third parties collect trading data at these times to calculate and publish a daily “fix rate,” which in turn is used to price orders for many large customers. “The Cartel” traders coordinated their trading of U.S. dollars and euros to manipulate the benchmark rates set at the 1:15 p.m. and 4:00 p.m. fixes in an effort to increase their profits.

As detailed in the plea agreements, these traders also used their exclusive electronic chats to manipulate the euro-dollar exchange rate in other ways. Members of “The Cartel” manipulated the euro-dollar exchange rate by agreeing to withhold bids or offers for euros or dollars to avoid moving the exchange rate in a direction adverse to open positions held by co-conspirators. By agreeing not to buy or sell at certain times, the traders protected each other’s trading positions by withholding supply of or demand for currency and suppressing competition in the FX market. 
Citicorp, Barclays, JPMorgan and RBS each have agreed to plead guilty to a one-count felony charge of conspiring to fix prices and rig bids for U.S. dollars and euros exchanged in the FX spot market in the United States and elsewhere. Each bank has agreed to pay a criminal fine proportional to its involvement in the conspiracy:
  • Citicorp, which was involved from as early as December 2007 until at least January 2013,has agreed to pay a fine of $925 million;
  • Barclays, which was involved from as early as December 2007 until July 2011, and then from December 2011 until August 2012, has agreed to pay a fine of $650 million; [Barclays plea agreement]
  • JPMorgan, which was involved from at least as early as July 2010 until January 2013, has agreed to pay a fine of $550 million; and
  • RBS, which was involved from at least as early as December 2007 until at least April 2010, has agreed to pay a fine of $395 million.
Barclays has further agreed that its FX trading and sales practices and its FX collusive conduct constitute federal crimes that violated a principal term of its June 2012 non-prosecution agreement resolving the department’s investigation of the manipulation of LIBOR and other benchmark interests rates. Barclays has agreed to pay an additional $60 million criminal penalty based on its violation of the non-prosecution agreement.

In addition, according to court documents to be filed, the Justice Department has determined that UBS’s deceptive currency trading and sales practices in conducting certain FX market transactions, as well as its collusive conduct in certain FX markets, violated its December 2012 non-prosecution agreement resolving the LIBOR investigation. The department has declared UBS in breach of the agreement, and UBS has agreed to plead guilty to a one-count felony charge of wire fraud in connection with a scheme to manipulate LIBOR and other benchmark interest rates. UBS has also agreed to pay a criminal penalty of $203 million. 
According to the factual statement of breach attached to UBS’s plea agreement, UBS engaged in deceptive FX trading and sales practices after it signed the LIBOR non-prosecution agreement, including undisclosed markups added to certain FX transactions of customers. UBS traders and sales staff misrepresented to customers on certain transactions that markups were not being added, when in fact they were. On other occasions, UBS traders and sales staff used hand signals to conceal those markups from customers. On still other occasions, certain UBS traders also tracked and executed limit orders at a level different from the customer’s specified level in order to add undisclosed markups. In addition, according to court documents, a UBS FX trader conspired with other banks acting as dealers in the FX spot market by agreeing to restrain competition in the purchase and sale of dollars and euros. UBS participated in this collusive conduct from October 2011 to at least January 2013. 
In declaring UBS in breach of its non-prosecution agreement, the Justice Department considered UBS’s conduct described above in light of UBS’s obligation under the non-prosecution agreement to commit no further crimes. The department also considered UBS’s three recent prior criminal resolutions and multiple civil and regulatory resolutions. Further, the department also considered that UBS’s post-LIBOR compliance and remediation efforts failed to detect the illegal conduct until an article was published pointing to potential misconduct in the FX markets.

Citicorp, Barclays, JPMorgan, RBS and UBS have each agreed to a three-year period of corporate probation, which, if approved by the court, will be overseen by the court and require regular reporting to authorities as well as cessation of all criminal activity. All five banks will continue cooperating with the government’s ongoing criminal investigations, and no plea agreement prevents the department from prosecuting culpable individuals for related misconduct. Citicorp, Barclays, JPMorgan and RBS have agreed to send disclosure notices to all of their customers and counter-parties that may have been affected by the sales and trading practices described in the plea agreements. 
Today, in connection with its FX investigation, the Federal Reserve also announced that it was imposing on the five banks fines of over $1.6 billion; and Barclays settled related claims with the New York State Department of Financial Services (DFS), the Commodity Futures Trading Commission (CFTC) and the United Kingdom’s Financial Conduct Authority (FCA) for an additional combined penalty of approximately $1.3 billion. In conjunction with previously announced settlements with regulatory agencies in the United States and abroad, including the Office of the Comptroller of the Currency (OCC) and the Swiss Financial Market Supervisory Authority (FINMA), today’s resolutions bring the total fines and penalties paid by these five banks for their conduct in the FX spot market to nearly $9 billion.

This investigation is being conducted by the FBI’s Washington Field Office.This prosecution is being handled by the Antitrust Division’s New York Office and other criminal enforcement sections and the Criminal Division’s Fraud Section.The Justice Department appreciates the substantial assistance provided by the CFTC, OCC, FINMA, FCA, DFS, Securities and Exchange Commission, Federal Reserve Board, and the U.K. Serious Fraud Office. The Criminal Division’s Office of International Affairs and the U.S. Attorney’s Office in the District of Connecticut have also provided assistance in this matter.

Wednesday, May 20, 2015

At AY CDC meeting, discussion of new app to report community impacts; ESD admits "little" institutional knowledge; open space change coming

In its third meeting, held yesterday, the new Atlantic Yards Community Development Corporation (AY CDC), set up to help monitor project impacts and benefits, heard extensive discussion of new ways to monitor such impacts.

On the one hand, the proposal for a new app to centralize reports of such impacts was encouraging to some--one project neighbor concerned about regular noisy crowds on residential Pacific Street across from the Barclays Center promised to be a regular user, and another suggested that residents of the new apartments in Atlantic Yards/Pacific Park should welcome it..

And more board members were engaged than in previous meetings. (A public meeting on the proposed app will be held on Wednesday, May 27, at 5:50 pm at 55 Hanson Place; a formal notice has not yet been released.)

On the other, it emerged that Empire State Development (ESD) , the state authority that is parent to AY CDC and oversees/shepherds the project, seems to downplay impact reports, designating them as “closed” though the problem may not be resolved.

That procedure—as well as a long-documented history of inadequate (though improved) oversight processes—surely will leave some doubts, especially if the new app supplants use of the community-generated Atlantic Yards Watch, which now has relatively few contributors but remains an independent source.

Indeed, the same day ESD’s Nicole Jordan reported that the number of complaints has been decreasing, and most are quickly resolved, a report on Atlantic Yards Watch documented a truck ignoring the required truck route.

Peter Krashes of the Dean Street Block Association (DSBA) said the quality of the response was key. In the ESD complaint log, he said, an incident report from January regarded complaints about a truck idling on a bus stop on Dean Street, not on the truck route.

The incident report, he said, was closed because “the truck was a boom truck, and boom trucks need to idle... So you have a truck that's illegally on Dean Street, abandoned in a bus stop,” and idling, the only element of the complaint that got a response. "You can't close it and have it disappear," he said. "You have to let us post a comment on how it's closed.”

Later in the meeting, Rhona Hetsrony of the DBNA spoke with frustration. “I want to invite everyone to my house at midnight... it's unbearable, for the people on Dean Street. I want to go on record and request that nobody ever approve overnight construction again. It's really unbearable for the community. I'm going to go home and get some sleep.” She then walked out of the meeting, and her statement got no response.

"Very little" agency institutional knowledge?

And Marion Phillips III, the ESD official who serves as president of the AY CDC, made a somewhat alarming admission as he explained why turnover—and shifting processes—at the parent agency means that ESD has systematically maintained a log of impacts only since January, nearly ten years after demolitions on the site began.

Previous staffers, Phillips said, kept notes, but not as a log the way Nicole Jordan, ESD’s Community Relations chief, has done since January. “There is institutional knowledge within the community, very little within the agency,” he said during the nearly three-hour meeting, held at the Department of Labor in Downtown Brooklyn. Unmentioned: that leaves the developer, now Greenland Forest City Partners, with the most institutional knowledge, and leverage.

Phillips’s admission was almost anticipated in a letter the DSBA sent a day before the meeting, which noted that Rachel Shatz, ESD’s Vice President, Planning and Environmental Review, has worked on the project since before it was approved, and continues in that position.

"For the app to be robust, it would have to take into account some historical concerns," commented  Jaime Stein, a professor at Pratt who has emerged as the AY CDC board member most willing to drill down on ESD procedures.

Changes in open space

Phillips also disclosed a yet unscheduled public meeting in June regarding the open space planned for Atlantic Yards/Pacific Park. (Eight acres are planned of such open space, which will be publicly accessible but not part of the city park system.)

In late May, he said, Greenland Forest City will make a presentation to ESD and city staff. “We believe there’s a nonmaterial change in their presentation,” he said. “The following meeting will be a meeting with the community.”

In other words, the developer’s made a change, and needs to make sure it’s approved without a public hearing or other vote by the ESD board to amend the project’s governing documents. But if ESD hasn’t seen the full presentation, how can it be declared a “nonmaterial change”?

Board attendance

Most but not all board members attended. Sharon Daughtry, one of the two board members who represent signatories of the Atlantic Yards Community Benefits Agreement (and thus seems to have conflicts of interests), missed her second straight meeting.

After missing the first two meetings as her baby came to term, Julene Beckford attended her first meeting. When I wrote about the board in February, the most recent evidence suggested she had worked as an attorney for City Council. Actually, Beckford is now associate counsel at ESD, which suggests that she—along with board members Kenneth Adams (former ESD President) and Joseph Chan (ESD VP, Real Estate)—are not about to provide tough oversight of the authority.

Noise control issues

Adams, for now heading the state Department of Taxation and Finance, noted that AY CDC directors a few days earlier received a long technical memo, more than 100 pages, describing noise control measures in the project. It responded to questions raised at previous meetings about the 16-foot high construction fence (at the southeast block of the project site, bounded by Dean Street, Carlton Avenue, and Vanderbilt Avenue), and the promised provision of double-paned windows for residents.

“I looked at sections of it,” Adams said. “If you need more time [to analyze it], it's understandable.” (The document should be posted shortly.)

“It’s a lot of material, some very dense, but right off the bat, I do have a few questions,” said Stein.

Stein asked how the map of the properties eligible for sound attenuation was created. A representative of AKRF, the consultant that prepares the environmental review documents, said the map came from the three possible construction phasing plans analyzed last year in the Final Supplementary Environmental Impact Statement, a court-ordered review of the impacts of potential delays in the project.

Stein asked how much outreach there had been to eligible tenants. Shatz said that was Forest City’s responsibility. The developer, said executive Jane Marshall, sent certified mail, email, and knocked on doors, but she acknowledged a gray area: “We are currently updating a tracking list that was created in 2007 when we first went and did this.”

”I think since January we've been sort of tracking [this],” Marshall said. “I haven't been the person specifically involved in it, so I'm probably missing some detail.” That’s a not atypical response from Marshall, who announces—or professes—some confusion about specifics. “I said to Rachel [Shatz], we should really figure out what kind of tracking matrix could be understood.”

Shatz said that, once Greenland Forest City has collated the information, ESD “will be looking at it with our mitigation monitor. There could be changes related to that tracking.”

Stein also asked about the 16-foot fence, and was told it was calculated to protect those on Dean Street opposite the construction site. (The fence has most infuriated those on Carlton Avenue.)

Community concerns

Jordan than summarized topics raised at the Community Update meeting a week earlier, including traffic, parking, truck routes, and affordable housing. She necessarily spoke in shorthand, but it was not fully informative. For example, one issue mentioned was “green roof crane removal”; actually, I asked why the Atlantic Avenue crane for the green roof would last far longer than originally announced, and got no answer.

ESD, Greenland Forest City, and the Department of Transportation (DOT) “responded to the many concerns, and informed community that additional responses will be provided when needed,” Jordan said.

Closure rates

Jordan reported that ESD has “a 94% closure rate on incidents reported to us,” either resolved in house or sent to the appropriate agency. She noted 80 incidents since January, with 75% closed in 48-72 hours.

“When you say it's closed, how do you know other agency does what they're supposed to do?” Adams asked.

“I follow up,” Jordan said, noting she adds to the log.

Board member Bertha Lewis was skeptical, asking if the incident was tracked to resolution, with a report in writing from the agency.

“I do follow up with the agency,” Jordan responded, noting that she had gone to DOT regarding concerns about the narrowing of Carlton Avenue.

Lewis said that was “great... but we're talking about resolution. Sometimes there is no resolution.” (Given that Lewis represents a CBA signatory—formerly ACORN—and I among others have suggested she has a conflict of interest, it was encouraging to see her taking on a broader oversight role.)

“She really manages it soup to nuts,” Phillips said of Jordan.

Adams suggested that staff not use the term “closed” for a referral, referencing Lewis’s point that “it doesn't really close until it gets done.”

Is there an overall trend regarding complaints, board member Shawn Austin asked.

“I'm getting less, since I started, since Greg started,” Jordan responded, referencing Greg Lynch, recently assigned to work on the project full-time, who walks the site regularly.

Later in the meeting, however, Krashes reminded the group that construction activities started in 2005. “There's a lot of fatigue [regarding reporting of impacts],” he said. “I don't think you can look at the number of incident reports as a way to measure whether you've succeeded.”

Stein asked if it was possible to integrate complaints filed through the city’s 311 system.

Because that's a city program, not a state one, “it's a process,” Jordan indicated. “We're still working with the city.” Phillips added that ESD has been talking with the mayor’s office and trying to figure out how to best sort such complaints, for example by zip code or specific boundaries.

“We’ve got to be sure we're also tracking 311,” mused Adams, “because we could be misleading ourselves.”

Plans for the app

Sam Filler, the ESD’s project director for Atlantic Yards/Pacific Park, described plans for the app, a software solution, designed to provide a centralized log, archival system, and improve community relations, given one phone number, email address and other source for community input.

The app should allow real-time documentation of issues, as well as provide distribution of announcements like the regular two-week Construction Update or even more last-minute update.

“We want a software system that can port with existing systems,” Filler said, noting 311 and Atlantic Yards Watch. “It’s a clean slate with how we approach this app… We want it to be the most effective tool possible.”

In response to a question from Lewis, Phillips said the app would cost from $8,000 to $20,000, and funded either from ESD/AY CDC funds or a cost agreement established with the developer.

Lewis, whose organization recently produced a report on the low rate of MWBE (Minority and Women’s Business Enterprises) contracts, asked whether MWBEs would be considered. Filler noted that the state has a 30% MWBE goal, and board member Liz Harris, of the Department of Agriculture, said the state was serious about such goals.

Austin pointed out that, if successful, the app will drive much traffic, and ESD will have to respond adequately.

“Your point is being considered,” Phillips responded, citing the roles of Lynch and Jordan. Over the summer, he said, ESD will use some interns to supplement its work, and reassess staffing needs in the fall.

Wayne Bailey, a frequent poster on Atlantic Yards Watch, noted that the web site documents ongoing complaints regarding such issues as dust or idling. That should generate responses and solutions, he observed, suggesting that the app won't be meaningful until it can lead to such resolution.

“The way it's described, it's about complaints, but can you leverage this app to push out some of the more positive aspects of the project?” asked Austin. (He’s not been involved in Atlantic Yards, to my knowledge, but his wife Jennifer Jones Austin co-chaired the transition team for Mayor de Blasio, a project supporter.)

“Inasmuch as it drives people to the website, sure,” responded Adams.

However, Krashes later warned that the combination “can get problematic,” suggesting that, if the app were used, for example, to distribute free tickets, it would muddle the issue.

Tamara McCaw, a board member who works at the Brooklyn Academy of Music and also serves on Community Board 2, asked about marketing to newer residents or even short-term visitors to the arena.

Phillips said “we’d love to work with you on marketing.”

Planned construction

Forest City’s Marshall described ongoing and planned construction. The B3 all-affordable tower at Dean Street and Sixth Avenue will break ground in june, while the B12 tower (unmentioned: condos) should break ground in the fall, and the B13 condo tower will break ground next summer.

That would mean all four construction sites on Block 1129, the southeast block fo the project site, will be active, along with work at the railyard and the West Portal project allowing direct access to the Atlantic Terminal tracks.

The Flatbush Avenue crane for the green roof went up this past weekend, and work is proceeding. “In the next two-week look ahead,” she said, “we’re putting in that we might be able to disassemble the crane earlier” than previously planned.

Noting that the crane is “disruptive,” narrowing Flatbush Avenue to two lanes near Dean Street, she encouraged anyone aiming to analyze traffic patterns to wait until the crane is removed.

Marshall said that, given such construction, it didn’t make sense to look at the buildings individually; hence the fence around the whole site. “In June, the crawler crane is going to come to the B11 site” at Vanderbilt and Dean, she said, requiring a 38-foot stretch “to the face of the fence... it's very consuming to real estate.”

“Believe me, nobody wants a 16 foot fence, but it's also performing a function” in response to ESD findings that certain mitigations were necessary “where practicable and feasible.” Such fences, she noted, were not feasible at the arena block, where they would snarl more traffic. “The intention was to have the least impact on the community.”

Bailey, who’s president of the 78th Precinct Community Council, said the precinct will lose 30 to 54 parking spaces, an issue that has not been resolved.

Community concerns

Krashes noted that the 16-foot fence on Dean Street was established with a week's notice and with no engagement with businesses on Dean. Marshall, who started her presentation at 4:30 and apologized for having to leave at 5 pm, left the room before Krashes continued with his concern.

Krashes said that, “to our mind, proper notice wasn't given” to neighbors, and “a whole host of residents were given parking tickets.”

He noted that the fence has led to vehicles regularly hitting trees on Carlton Avenue, suggesting protection for such trees had not been scanted.

Also, he said, residents received a letter regarding potential noise mitigation—double-pane windows— two or three months after the groundbreaking last December for the B15 tower at Carlton and Dean, but it was “dated to the point of the groundbreaking.”

According to the Memorandum of Environmental Commitments (MEC), “noise mitigation measures shall be implemented – where such measures have been accepted by building owners and their tenants – in a timely manner.”

Krashes asked Shatz if the developer met the MEC terms regarding public notice, and if there was a penalty.

Shatz said ESD will be reviewing Forest City’s recordkeeping, so she couldn’t yet comment on compliance.

Barclays Center touts progress and plans

Barclays Center Community Relations Manager Terence Kelly gave a long report on arena operations, touting the venue’s rankings and the “considerable number of protocols” set up to ensure purportedly smooth operation, such as sending late arrivals away from the loading dock and informing all truck drivers of truck routes.

“At first, we ran into a bit of a struggle when it came to communicating” with new vendors, Kelly said, “but we really hit a stride.” That statement would be disputed by many neighbors, who, while acknowledging improvements, also note regular problems.

Kelly mentioned that there were six bays in the arena’s below-grade loading dock. Interestingly, that contrasts with the eight bays mentioned in this May 2012 ESD presentation regarding the Transportation Demand Management plan. (See question 7.)

Kelly described how the arena now announces not only ticketed events but also private events, estimating potential attendance, and also circulates information on ticket discounts and other arena issues.

Adams monopolized the limited time available with business-related questions that, while interesting, where somewhat beyond Kelly’s pay grade as well as unrelated to community concerns about arena operational impacts.

Adams asked whether the move of the NHL’s New York Islanders in the fall would nudge the Barclays Center from second to first in paid attendance, or whether it would add more total dates to the schedule.

Kelly said no, because “we're a smaller building” than rival Madison Square Garden, with 15,800 maximum attendance for hockey. Also, the 44 hockey dates will, in the main, substitute for dates otherwise devoted to concert. (That said, I’d bet overall attendance increases.)

In response to another question from Adams, Kelly said the arena is marketing on Long Island to encourage fans to take the Long Island Rail Road rather than drive.

Community comments

Resident May Taliaferrow, who lives on Pacific Street between Flatbush and Fourth avenues, asked Kelly about pedestrian crowd control. Nets fans, she said, have learned to go directly to the subway. “Is there a way to prevent the crowd from coming up a residential block,” she said, pointing out that they could go to the entrance to the D/N/R trains via Flatbush Avenue rather than (more directly) via Pacific Street.

“I'm mindful of your concern,” Kelly responded, not quite promising.

“Part of the problem is they [some arena attendees] go to the P.C. Richard parking lot, hang out, smoke weed,” Taliaferrow reported,

“We'll assess conditions, and adjust as needed,” Kelly responded.

“I can't wait for that app,” Taliaferrow commented.

Krashes noted that “there's definitely a shortfall in space for the arena to operate.” So if events spill out in the street, he said, the arena should work with the city and develop more protocols

Gib Veconi of the Prospect Heights Neighborhood Development Council, and the technical overseer of Atlantic Yards Watch, said he was encouraged by plans for the app. “There are some pretty compelling incentives for Greenland Forest City to get involved,” the said. “The tenants will become the biggest users of this applications. I'm not joking. I think they will be very ready customers for this application. It makes sense to plan for that in advance.”

Tuesday, May 19, 2015

EB-5 farce: my blog used to help sell Nassau Coliseum investment to immigrants seeking green cards (true)

Fifth of a five-part series on Forest City Ratner's plans for Nassau Coliseum redevelopment.
Part 1 concerned the overall plan. Part 2 addressed the curious politics of a Community Benefits Agreement. Part 3 addressed the astonishing pitch in China for EB-5 investment. Part 4 discussed Forest City's claim, at the Nassau County Legislature, it wasn't making much profit on EB-5, and its defense of a sketchy fundraising partner. This fifth part concerns the brazen effort by EB-5 promoters to use an excerpt from this blog.

It's no secret that I'm a wee bit critical of the EB-5 program, under which immigrant investors get green cards for themselves and their families in exchange for parking $500,000 in a purportedly job-creating enterprise.

After all, the benefit goes mostly to the developer/entrepreneur, the middlemen, and the immigrant investors, not the public, which "owns" the valuable property (visas) being traded.

Moreover, the marketing of EB-5 projects is often at best deceptive and at worst fraudulent. Immigrant investors, especially those in China, by far the largest market, are not necessarily expected to do diligence, or to understand what they read in English.

Consider the excerpt at right and below from the recent iteration of the Qiao Wai web site pitching the Nassau Coliseum EB-5 investment, $90 million from 180 investors.

Arrow added by AYR, other highlighting in original
The excerpt aims to convince potential investors that the deal is solid.  Indeed, most of the evidence easily bolsters that perspective.

But the web site's sloppy use of an excerpt from my blog--including the seemingly damning subtitle "Other questionable statements"--shows that those promoting EB-5 have no expectation potential investors can understand English.

It's not dissimilar to the use of stale, off-topic quotations, while promoting the EB-5 investment in Atlantic Yards, from former Brooklyn Borough President Marty Markowitz, former New York City Mayor Mike Bloomberg, and former New York State Governor David Paterson.

There's no regulation, and they get away with what they can. (I did nudge the U.S. State Department about the improper use of a top official, and they pressured the promoters to stop.)

The Nassau Coliseum pitch

The heading of this section, according to a professional translator, promises "Government oversight throughout the entire process, guaranteeing the integrity of the project."

It elaborates that various levels of government in New York will participate.

Note that Chinese investors feel more confident when government is involved.

Step 1 indicates that, once the reconstruction project was established, "it was given policy support and tax relief from the government."

(Actually, the project was promoted in August 2013 by Nassau County Executive Ed Mangano as "100% privately financed Coliseum that will share revenue with the County at zero expense to the taxpayer.")

Step 2 indicates that representatives of Nassau County met with Forest City Enterprises to sign a long-term lease for the Coliseum--quite true.

Step 3 notes that the state government has agreed to "invest part of its funds to support the construction of the facilities surrounding the reconstruction project." Indeed, in January, Gov. Cuomo's executive budget proposed allotting some portion of a $150 million fund to a Coliseum parking facility.

Step 4 reaches farce

Step 4 cites a 2015 statement by Mangano that "the reconstruction project of the Long Island Coliseum supported by the government will begin in the latter part of this year." That's true, except that "support" is more cooperation than anything else.

But do check out Step 4, which contains an excerpt from this blog, published 3/27/15 under the headline Nassau County Executive Mangano bizarrely suggests renovated Coliseum will lure Islanders back; Ratner in dispute over retail plan?

A section I subtitled "Watching Mangano wink" addressed the County Executive's curious announced plan to lure the New York Islanders back to the renovated Coliseum, though they have announced a relocation to Brooklyn, which has far more suites and sponsorship opportunities.

"Other questionable statements"

The next section was subtitled "Other questionable statements." Bizarrely enough, those excerpting it for the Qiao Wai web site did not remove the subtitle. Note the big red arrow I added.

The EB-5 promoters did highlight, using red rectangles, Mangano's statements that construction would begin at the Coliseum later this year and would employ 2,700 people--both pieces of information that would inspire confidence in those considering EB-5 investments.

(Each of the 180 investors has to "create" 10 jobs, though the number is not a head count but rather an economist's calculation, and the investors can gain credit for jobs calculated based on the entire amount of money in the project, not solely their investment.)

The next paragraph in my post questioned the claim of 2,700 jobs and $10 billion in economic benefit. It was, unsurprisingly, excluded from the excerpt. But anyone who understands English should have been flummoxed by the "Other questionable statements" subheading.

At bottom of the excerpt, the message is sunny: with the project "moving forward, it’s expected that more supportive government policies will gradually come out. So stay tuned."

Indeed, that's Forest City Ratner's m.o., to make a deal and then wrangle "more supportive government policies." In that, the investors were provided with some unwitting candor.

Arrow added by AYR, other highlighting in original

In advance of today's AY CDC meeting, block association questions ESD's responsiveness

Note that the meeting is May 19, not March 19
The proposed agenda for today's 3 pm meeting of the Atlantic Yards Community Development Corporation (AY CDC) doesn't have a lot of detail, but it includes the following topics:
  • Community Relations Update
  • Project Update
  • Barclays Event Protocols
The meeting will be held at:
New York State Department of Labor - Brooklyn Office
250 Schermerhorn Street,
Orientation Room #2 – First Floor
Brooklyn, New York 11201
Letter: state falls short

One issue that may come up in the public comments is a letter (text below) sent by the Dean Street Block Association (DSBA) to Empire State Development that contends that the state agency has not sufficiently responded to complaints and other public input, and restricted information available to the public. The letter is on the DSBA web site.

The DSBA represents neighbors directly adjacent to the project site and most vulnerable to late-night noise, errant trucks, and other violations of--or inadequate--construction protocols.

As noted in the letter, the public meetings held by the state--previously called Quality of Life Committee, now Community Update--have become less accountable. "The community seeks a qualitative response received in a timely way," the DSBA says.

The block association asked the staff and executives of the state agency to provide the new AY CDC board "with the data and documentation they have collected of community concerns and ESDC’s responses since Atlantic Yards project’s approval," as a way to better offer input on the project.

The letter
We believe the information the community has made available to the State throughout the construction-phase of the Project would have created timely improvements if it had been responded to when made available. Likewise, we believe the State has limited the opportunity for the community to suggest improvements by restricting the comprehensiveness, and delaying the release of the information it makes public.
Among other things, the various versions of meetings the State sanctions with the community, (the District Service Cabinet, Quality of Life, and Community Update meetings), have been missed opportunities for the community to assist the State in improving the  Project. Although no version has truly been successful, each subsequent iteration has been less successful than the one before it.
To our knowledge, official minutes have rarely if ever been kept and no recording has been allowed. The most recent iteration is apparently directed toward the dissemination of information that could be released more productively in other ways.
Likewise, the complaints received in the interim between meetings, whether by direct interaction or Atlantic Yards Watch, have often not received responses in a timely way, and when those responses have been received, they often fall short qualitatively, whether because the response is directed toward a part rather than the whole concern, or because they are rhetorical and indirect. The community seeks a qualitative response received in a timely way.
At its last meeting the AYCDC board discussed the need to assess the ESD’s “performance metrics” and methods as a means to judge the quality of the State’s oversight of the Project’s environmental commitments. The ESD staff provided a log of community concerns to the board members and stated a log of its nature had only been maintained since January 2015. The ESD staff and executives did not offer additional material from earlier in the project. Our community has experienced adverse construction impacts related to the project since 2005, and we have given input to the State in good faith for much of that same period through meetings, 311 complaints, telephone calls, and emails with ESDC executives including Jennifer Maldonado, Forrest Taylor, Arana Hankin, Derek Lynch, Rachel Shatz, and Nicole Jordan. As a means to identifying and tracking patterns over time, we have kept records of many of those interactions. We ask the staff and executives of the ESDC to provide the new AYCDC board with the data and documentation they have collected of community concerns and ESDC’s responses since Atlantic Yards project’s approval. We believe reviewing the State and community’s past records is the best opportunity the new AYCDC board has, and we hope the State assists us in working with the board to succeed.
Fortunately, along with the community’s institutional knowledge, there is meaningful continuity in the ESD in respect to overseeing environmental impacts related to the Project. Rachel Shatz, ESD’s Vice President, Planning and Environmental Review, has worked on the project in the same relative position since before the project was approved, and continues in that position.
It is our goal to create accountability and transparency with the State as a means to improving adherence to the environmental commitments that are an intrinsic part of the Project’s implementation, while also working to improve the final outcome of the Project. The community has given input and expressed its concerns about many of the same issues for years. What we need is a State agency that wants to work with the community and the public to improve the project it oversees.