By MICHAEL HOWARD SAUL
Wall Street Journal July 2, 2012
New York City's economic-development agency and two related organizations admitted in a settlement Monday that they illegally lobbied the City Council on behalf of projects at the heart of Mayor Michael Bloomberg's redevelopment agenda.
The concessions came after a three-year probe by the state attorney general's office. Investigators found that the Economic Development Corp. worked behind the scenes with the groups—called local development corporations—to nudge lawmakers to support projects in Willets Point in Queens and Coney Island in Brooklyn.
"These local development corporations flouted the law and lobbied elected officials, both directly and through third parties," Attorney General Eric Schneiderman said in a statement.
Local development corporations are nonprofit organizations that can acquire land from a municipality without public bidding, and they are commonly used in major public projects. While technically separate from government, their political independence varies widely. They are banned from lobbying.
The findings seemed to give ammunition to critics of the Bloomberg administration and its economic-development arm, which has been accused of pushing through large-scale projects over community objections.
The local groups—the Flushing Willets Point Corona Local Development Corp. and the Coney Island Development Corp.—arose out of Mr. Bloomberg's plan to remake two of the city's grittiest pockets. Officials envisioned turning Willets Point, a wind-swept swath of auto-repair shops, into a shopping and residential center, and overhauling Coney Island into a more upscale seaside retreat.
In pushing the Council for zoning and other land-use changes, city officials "took steps to foster the appearance of independent 'grass-roots' support for the projects in the local community," said the agreement signed Monday by the EDC and the other groups.
For example, the agreement said the EDC directed the Queens group to use its fax machine to send a letter drafted by city officials about the Willets Point project to Council members because, in the words of one city official, "we felt this letter coming from our fax machine would have been lobbying."
Other lobbying activities included ghostwriting op-eds and preparing testimony, according to the agreement.
The finding carries no fine or harsher penalty. The EDC, a nonprofit, must restructure and shed its status as a local development corporation. The other two groups have agreed not to lobby or encourage third parties to speak with elected officials.
"This agreement will bring transparency and accountability to these and other local development corporations operating in New York state," Mr. Schneiderman said.
The EDC said the restructuring would be "seamless" and "enable the company to operate freely and legally in areas that are necessary and appropriate for it to achieve its economic development mission."
Robert Bishop, an attorney for the Queens organization, said the agreement "speaks for itself." He said, "This Flushing Willets Point Corona LDC is a good group, which does good things, and it will continue to do good things."
The organization's leader, Claire Shulman, a former Queens borough president, couldn't be reached for comment. The Brooklyn group declined to comment, a spokesman said.
Irene Prestigiacomo, a member of Willets Point United, a group opposed to the city's plans for the area, said she was disappointed in the outcome.
Ms. Shulman's organization has "gotten away scot-free with breaking the law at our expense and have been rewarded with a mild tap on the wrist," Ms. Prestigiacomo said.
Aides to Mr. Schneiderman said the law doesn't provide for financial penalties. While the office could have sought to dissolve the groups, aides said, the facts didn't rise to that level.
In 2009, the City Clerk imposed a $59,090 fine against Ms. Shulman's group because she failed to register as a lobbyist.
Write to Michael Howard Saul at email@example.com
A version of this article appeared July 3, 2012, on page A17 in the U.S. edition of The Wall Street Journal, with the headline: City Agency Admits Illegal Lobby Effort.