Re: An association-in-fact -- The Free Voice of Newburgh New York

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Date Posted: 14:35:47 02/17/11 Thu
Author: Here's just an example!
Subject: Re: An association-in-fact
In reply to: One more at the ranch 's message, "Re: An association-in-fact" on 14:33:43 02/17/11 Thu

By Chris Mckenna
Times Herald-Record
Published: 2:00 AM - 02/15/11
For 12 months, Orange County officials improperly sent lease payments for county offices in the City of Newburgh to a politically connected developer who was in the midst of a financial tailspin, according to a Wells Fargo Bank executive.

Under an agreement dating to 1996, the county was supposed to send $60,648 every month to M&T Bank to pay off $5.7 million in bonds that Robert Carchietta's Gemma Development Co. used to transform a burned-out armory into a bustling hub for social services and other government use.

But from August 2009 through July 2010, the county flouted its lease by instead sending the money to Gemma at the company's request, the executive claims. Wells Fargo, which has since replaced M&T as the bond trustee, is seeking to recover at least three payments totaling $181,944 that it says Gemma didn't send the bondholder during that period.

Robert Carchietta's Newburgh properties
� Armory, 145 Broadway: It was built in 1879 for the National Guard and shifted to commercial use after another armory opened on South William Street in 1931. Gutted by fire in 1980 and placed on the National Register of Historic Places the next year, developer Robert Carchietta bought it for $20,000 in 1996 and refurbished it to house Orange County government offices. The county pays $727,776 a year for 45,600 square feet of space.

� Woolworth Building, 128 Broadway. Robert Carchietta bought it for $275,000 in 2003 and renovated it to hold 25,000 square feet of government offices, including the Department of Motor Vehicles. Orange County rents it for $172,500 a year.

� The campus that never came, 132 Broadway. Robert Carchietta bulldozed an entire block in 2005 in hopes of building a SUNY Orange campus. His plans were thwarted in October 2006, when Orange County lawmakers chose a different site for construction. The City of Newburgh seized 44 Carchietta-owned parcels, including the failed college site, for non-payment of taxes in 2009.
The redirection of funds was spelled out in an Aug. 26 letter from Gavin Wilkinson, a Wells Fargo vice president, to the City of Newburgh Industrial Development Agency, which issued the armory bonds. The Times Herald-Record recently obtained a copy of the letter.

The Wells Fargo letter says the bond installments for March, April and May 2010 went unpaid and defaults "are continuing," which raises the question of whether the county's money for June and July also disappeared.

Payments to bank missing
Wilkinson declined to clarify that issue or discuss the matter at all when contacted. Elizabeth Majers, a Chicago lawyer representing the bondholder, didn't return phone calls.

Thomas Whyatt, attorney for the Newburgh IDA, said Majers told him Gemma initially met the bond obligations by wiring the funds to the bondholder after getting it from the county. That arrangement appears to have caused no alarm until Gemma stopped forwarding the money in March, he said.

County spokeswoman Orysia Dmytrenko confirmed Monday that the county began wiring the armory rent to Gemma's bank in August 2009, but says it did so for 10 months, not 12. The county resumed paying M&T in June, after M&T notified the county's attorneys that three payments had been missed.

She said she didn't know which county official granted Gemma's request.

"M&T knew this was happening all these months, nine months," Dmytrenko said. "They could have come to us at any time during that period, and it would have stopped."

Carchietta couldn't be reached for comment. A man who answered Carchietta's cell phone on Monday said he wasn't Carchietta but would deliver the message.

The overhaul of the crumbling armory on Broadway was the first of two major projects Carchietta completed for the county. In 2002, five years after the armory opened, County Executive Ed Diana contracted with him to renovate the former Woolworth Building across the street to house the Department of Motor Vehicles and other county offices.

High-stakes Republican donor
For years, Carchietta endeared himself to Republican politicians by pouring money into their campaigns. He gave Diana $14,000 over five years, which made him one of the county executive's biggest donors. He has contributed $7,300 to state Sen. William Larkin Jr. and $4,300 to state Sen. John Bonacic since 1999. In 2002, he shoveled $20,000 into then-Gov. George Pataki's re-election bid.

Still, connections failed to win him a third project he coveted: the construction of an expanded SUNY Orange campus in Newburgh. In 2005, he bulldozed an entire block beside the Woolworth Building in anticipation of the work, but lost the project a year later when county lawmakers chose to build the campus three blocks away.

Carchietta's financial problems began soon afterward. In April 2007, six months after the Legislature snubbed his college site, he stopped paying a $1.1 million mortgage on his 6,600-square-foot house in Goshen, court papers show.

By the time the county began sending him the armory lease payments in August 2009, Carchietta was mired in debt. His home was in foreclosure. M&T Bank was going after the Woolworth Building and Armory because he defaulted on $2.1 million in loans. And the City of Newburgh had just seized the failed college site and other Carchietta properties for nonpayment of taxes.

Thus far, no lawsuits have been filed against Carchietta, Gemma Development, Orange County or the Newburgh IDA to recover the $181,944 in missing bond payments.

Carchietta, who claimed to owe $5.3 million when he filed for bankruptcy on Aug. 16, would be hard-pressed to pay. In court papers filed Dec. 30, a trustee told the judge hearing the case that Carchietta "has had no income since the filing of the case, has not made any mortgage payments, and has subsisted through unauthorized 'loans' from family members."

By then, the trustee saw no hope that Carchietta could untangle his debts. And late last month, the developer's request for protection from his creditors was thrown out of court.

cmckenna@th-record.com

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