Cuomo donor faces probe
U.S. attorney’s office investigating Crystal Run, which received $25.4 million in state grants
The U.S. attorney’s office in Manhattan is investigating Crystal Run Healthcare, a Hudson Valley company that received an extraordinary $25.4 million in state grants following a series of campaign contributions to Gov. Andrew Cuomo.
The investigation has been revealed through federal grand jury subpoenas seeking testimony from multiple Crystal Run employees, according to people with knowledge of the matter.
Crystal Run, its executives, their spouses or company doctors have given at least $400,000 to Cuomo’s campaign, with most of that coming in a flurry of 10 donations of $25,000 apiece that were made at a Cuomo fundraiser in October 2013.
The Times Union reported in 2017 that seven of those $25,000 donors had not made a contribution in a New York election for at least a decade before giving the large and identical sums to Cuomo, according to state Board of Elections records. The story last year noted that the state Department of Health had awarded $25.4 million in March 2016 to build two Crystal Run health care facilities, despite both having already broken ground about six months earlier.
Asked about the federal subpoenas, a Crystal Run spokesman initially said the company “will not have any comment for now.” After this story was posted online Monday afternoon, the company issued the following statement: “Over a year ago, we received a subpoena requesting documents and we have since complied. We have no reason to believe that we are the focus of a current federal investigation. We remain focused on providing our patients with the quality, affordable care they deserve.”
A spokesman for the U.S. attorney’s office for the Southern District of New York, which is heading the investigation, also declined comment.
Reached by phone, several Crystal Run officials who were among the company’s cohort of $25,000 donors to Cuomo declined to comment on whether they had received subpoenas.
Crystal Run CEO Hal Teitelbaum, who has personally given $70,000 to Cuomo’s campaign, said he had “no idea” about the grand jury subpoenas before hanging up the telephone. Teitelbaum’s wife, Jennifer, was among the donors who gave $25,000 in 2013.
A Cuomo spokesman said the Executive Chamber has not received a subpoena. A state Health Department spokesman said their agency also has not received a subpoena related to its issuance of the grants to Crystal Run.
At least some of the grand jury activity is apparently focused on the campaign donations to Cuomo.
Among those subpoenaed are six former Crystal Run doctors who filed a lawsuit against Crystal Run in December accusing the company’s top management of “self-dealing.” The civil complaint referenced the donations to Cuomo.
In their complaint, the plaintiffs asserted they were not consulted by the company’s management about the donations.
According to the lawsuit, the plaintiffs confronted Crystal Run leadership about the 2013 campaign giving, and an unnamed senior Crystal Run executive was asked to explain “what appeared to be an unlawful payoff,” according to the civil lawsuit.
The Crystal Run executive allegedly responded that there are certain things “that management needs to do and that the other physicians need not know about.”
The partnership agreement of the six former Crystal Run doctors stated that they had to each make substantial, regular “capital contributions” to Crystal Run to fund the company’s operations.
Steven Shore, an attorney for the physicians who filed the lawsuit, told the Times Union in December that he would seek information about whether the $25,000 donations made by individual Crystal Run executives were paid using “pooled” company funds.
The Crystal Run spokesman, Loren Riegelhaupt, declined comment earlier this month on whether the Cuomo donations were made in that manner.
It is illegal under New York election law to give a campaign donation using
a “straw donor” to conceal the true origin of a contribution. The use of so-called “straw donors” to funnel money to a candidate has resulted in occasional prosecutions, including cases in recent years that led to the convictions of Halfmoon developer Bruce Tanski and, on the federal level, conservative commentator Dinesh D’souza.
Another attorney for the six plaintiffs, Ira Matetsky, said earlier this month that the civil lawsuit had been settled with Crystal Run and that the six physicians were bound by a confidentiality clause to not discuss the case.
The settlement also restricts the six plaintiffs from publicizing any findings about the campaign donations they might have uncovered during the civil lawsuit’s discovery process.
The civil lawsuit, filed in state Supreme Court in Westchester County, was primarily prompted by Crystal Run’s “business
combination” with Bronxbased Montefiore Medical Center — a relationship that the plaintiffs had argued would harm their financial interests and those of other Crystal Run physicians, who jointly own the company in a partnership.
Cuomo’s office has repeatedly said that campaign donations don’t affect the administration’s policy decisions.
The Department of Health maintains that all grants made from a $1.2 billion pot of money, including the $25.4 million given to Crystal Run in 2016, were competitively bid and awarded in the exact order of their scoring. Whether a project was already under construction without a subsidy was not among the criteria.
The Department of Health also did not submit documents in 2016 to Comptroller Tom Dinapoli’s office that would have shown that a central contractor on the two Crystal Run projects, Joe Nicolla of Albany-based Columbia Development, was at the time facing a state bid-rigging charge. (The charge against Nicolla was dropped by prosecutors last week in exchange for his agreement to cooperate with related investigations.)
Crystal Run has had other favorable interactions with state government. For instance, the Department of Financial Services approved a rate hike of more than 80 percent for individual plans issued by a Crystal Run health insurance company for 2017.
Both state Republican chairman Ed Cox and Steve Mclaughlin, a former state assemblyman who is now Rensselaer County executive, called for probes into Crystal Run following the Times Union’s reporting last year.