Subsidy OK’d For Sex Predator’s Companies

The Board of Alders overwhelmingly voted to approve another $900,000 in state tax credits for six companies controlled by imprisoned sex predator Rabbi Daniel Greer — and shut down two alders’ attempts to discuss allegations of fraud by those companies.

That vote and open debate crackdown took place Monday night during the latest regular full Board of Alders meeting, held online via Zoom and YouTube Live.

As the last item on the 43-point agenda for the night, local legislators briefly discussed and then took a final vote on this year’s Connecticut Neighborhood Assistance Act (NAA) program list.

That’s the annual list of local nonprofits looking for city and then state permission to participate in a government subsidy program. Through the program, the state Department of Revenues Services (DRS) provides tax credits to for-profit companies that make cash contributions to eligible nonprofits.

This year, as has been the case for many years, six companies controlled by imprisoned sex offender Rabbi Daniel Greer applied for up to $900,000 in tax credits through the competitive statewide program.

Those applications have generated controversy:

• The man who created and controls those companies is currently serving a 20-year prison sentence for raping a former yeshiva student. (Greer has appealed the case.). He has so far refused to pay his victim a $21.7 million court-ordered civil judgment.

• That same victim has accused Greer’s companies in federal court of funneling money to their imprisoned owner to help him avoid paying the civil judgment.

• A federal judge found those accusations of fraud credible enough to temporarily bar the companies from buying and selling property while the court continues to hear the case.

• In a separate ongoing federal lawsuit, a previous funder to Greer under the NAA program has pulled back support over concerns about fraud, according to court documents. (Details in this previous article, and here and here.)

Meanwhile, the city conducts no independent financial audit of NAA program participants. Instead, it relies upon people like Greer’s personal secretary to vouch that the state-subsidized contributions are being spent appropriately, and on the state to identify and act on any potential abuse of the program.

Despite all that, the alders voted by voice Monday night to keep the state subsidies flowing to Greer’s nonprofits. Alder Abby Roth was the only member heard voting no. (Update: After this article published, East Rock Alder Anna Festa told the Independent that she too voted ​“no” in the voice vote. Also after the article published, Westville Alder and Health and Human Services Committee Chair Darryl Brackeen, Jr. told the Independent he abstained from Monday’s vote.)

The alders made that decision while disallowing any public discussion of all of the above concerns.

In fact, board leaders reprimanded alders who dared broach the issues, and shut down that discussion.

This year’s NAA list of local eligible participants, with Greer’s companies included, now advances to the state Department of Revenue Services (DRS). That’s the state body that has the final say on which companies can participate in the competitive program, and on how much each participant can solicit in tax credit-eligible donations.

The state by law relies on New Haven’s alders to advise how best to spend this money.

The end result: The Elicker administration and the Board of Alders had their chance to publicly discuss and debate whether or not city government should —or, in some perverse reality, must — rubber-stamp government subsidies for companies accused of fraud and controlled by an imprisoned sex predator. They decided instead to blame others, stifle dissent, throw their hands in the air, and approve the tax credits anyway.

Monday night’s vote also happened to take place one day before a federal judge is slated to hear a debate in court between lawyers representing the abused former yeshiva student and Greer’s companies over the fraud allegations.

While the validity of the fraud accusations is still to be determined, the judge wrote in that pre-hearing memorandum, there is at least one part of this case that both the plaintiff and the defendants agree on: ​“Greer controlled and dominated the corporate Defendants” — that is, those same nonprofits now on track to get up to $900,000 in state subsidies this year.

“Point Of Order”

So, what did Monday’s ​“debate” look like?

Click on the video above and go to the 1:03:02 mark to watch the relevant part of the meeting. The NAA discussion goes until 1:16:20.

It started with Westville Alder and Health and Human Services Committee Chair Darryl Brackeen, Jr. reading a statement about how the city’s role in this annual tax credit program is simply to act as the ​“initial intake process” between the state and the local nonprofit applicants. That mirrors the same interpretation that was offered at an aldermanic committee hearing last week by the city Livable City Initiative (LCI) deputy who is the local point person for the state tax break program.

Brackeen stressed on Monday that DRS is the only government body with true approval power over which companies get to participate in the state tax credit program designed to help local neighborhoods thrive. He said that he and his colleagues came to that conclusion after soliciting the advice of local attorney Steve Mednick — though Mednick’s opinion makes clear that alders by law have discretion; they have the right to ask questions and independently look into whether companies are carrying out their mission properly before green-lighting the flow of money to their coffers. (Click here to read Brackeen’s comments in full.)

Then, Alder Steve Winter (pictured) — who represents Prospect Hill and parts of Newhallville and Dixwell — raised an alternative reading of state law.

Just as he said during a recent committee meeting, Winter said that the section of state law that permits cities to submit NAA lists to DRS ​“after approval by the legislative body of such municipality” clearly empowers the alders to ​“approve” or, conversely, not approve the items on that list.

“My reading of that language is that the Board of Alders has the discretion to remove programs that we deem unfit for the Neighborhood Assistance Act” government subsidies, he said. That would allow local legislators to act in a similar way that they do when determining which programs to fund with annual federal Community Development Block Grant (CDBG) money.

“In this case, there are serious and disturbing allegations currently being litigated in Superior Court of funds being diverted in order to avoid paying a court-ordered judgment,” Winter said. ​“Diverted from organizations that have benefited from the Neighborhood Assistance Act in the past and are applying now for Neighborhood Assistance Act tax credits.

“Absent any financial misdeeds, these credits would be used to provide energy-efficiency retrofits in pursuit of the Neighborhood Assistance Act’s stated objective of energy conservation. These improvements would be made to the houses owned by the applicants that are subject to litigation and will probably be foreclosed upon to satisfy the court-ordered judgment…”

At that point Majority Leader Alder Richard Furlow jumped in.

“Point of order, Madam Chair,” he said. ​“We are moving beyond the scope of what we’re voting on this evening.”

Board of Alders President Tyisha Walker-Myers agreed.

“We are only talking about whether we’re going to approve or disapprove. So,” she said to Winter, ​“do you have a stance? Do you want to say you urge colleagues to support or not support? Wrap it up.”

“I would provide my rationale in support by answering the question: How likely is it that tax credits will be abused and diverted from their stated purpose?” Winter continued. ​“In the absence of action by the court, I would say these allegations should be disqualifying. But the court has enjoined these organizations from conveying real estate and from transferring personal property…”

That’s when Furlow jumped in with another ​“Point of order.”

“I got it,” Walker-Myers said. ​“We’re going to move on,” she told Winter. ​“I said: Are you saying you support, or not? Just answer that question. You’re in support. You’re not in support.”

“Yes, Madam President, I’m in support,” Winter concluded.

“Ok,” she said. ​“We’re going to move on. You stated your case. You said your reasons why. We’re going to move on so we can carry on with this vote.”

Walker-Myers: Fraud Concerns Not ​“Germane”

Looking for (virtually raised) hands to call on next, Walker-Myers then prepared to call on Downtown Alder Roth.

Before giving Roth floor, she gave her colleague a warning.

“Take heed from what I just said to the alder from Ward 21,” she warned. ​“Stay very germane, or you will be cut off too. Thank you.”

Roth said that she agrees with Winter’s interpretation of the law. She said the state law does give the alders a discretionary approval role over the list of NAA organizations ​“based on the plain language of the statute and the fact that it would make no sense to have this just be a checklist we review.”

She then proceeded with caution.

“I will not get into the details [of] including five of the entities under litigation,” Roth said. ​“I do not agree to include them. I won’t go into detail as I will probably be told not to continue, but I oppose including them.”

“Thank you very much for complying,” Walker-Myers said after Roth had finished.

With no other alders interested in talking on the matter, the full board took a final voice vote. Roth’s was the only voice among the nearly two dozen present to vote in opposition.

Update: After this article published, East Rock Alder Festa said that she voted ​“no” alongside Roth because she didn’t think that the city and the alders had a ​“good process” in place for deliberating on NAA applications by Greer’s companies.

“I can’t support a predator,” she told the Independent. ​“I don’t know how he’s using the money.” She said she did not speak up during Monday night’s Board of Alders meeting because Alders Roth and Winter raised the points that she would otherwise have raised.

Also after this article published, Alder Brackeen told the Independent he abstained from the vote because ​“my questions supported and provided by Attorney Mednick were not given the answers needed to ultimately address those pertinent questions to support future actions. We could not take action without all of the facts.”

Attorney Mednick: Alders Have Discretion

The alders and LCI landed on an interpretation that gives the city virtually no discretionary authority to remove companies accused of fraud from a government subsidy list. Is that the only way to read the law?

An opinion written up by a local attorney in response to the alders’ request for counsel seems to indicate otherwise.

That local attorney is former Alder Steve Mednick, a leading attorney in the municipal law field.

Alder Brackeen told the Independent after Monday night’s meeting that, at his request, the alders sought outside counsel asking Mednick to look into the role of the local legislative body in this annual NAA approval process.

Mednick’s May 26 legal opinion, which can be read in full here, offers a comprehensive review of the NAA law.

It states unequivocally that the alders hands are not tied by the state, and that they do have some discretion when it comes to what list they approve.

Mednick first points to the plain language of the law.

“Municipalities seeking to participate in the program or ​‘obtain benefits’ under the laws shall submit to the Commissioner of Revenue Services ​‘programs eligible for investment firms’ under the provisions of the NAA ​‘after approval by the legislative body of such municipality.” (Mednick’s emphasis.)

Further down in the opinion, Mednick writes in a section entitled, ​“What is the Role of the Board of Alders?”:

“The Board of Alders is the legislative body of the City and as such is granted ​‘wide and liberal discretion’ although not unlimited,” Mednick wrote. ​“However, it is clear that legislative bodies do not act as administrative entities with respect to the matters that come before them. It is equally true that while a legislative body ‘… cannot delegate its legislative powers to others’ ’ powers of a purely ministerial, administrative, or executive nature, may be delegated.’ So, when the statue [sp.] requires approval by the legislative body of the municipality the fair reading of the law is an expectation of the exercise of discretion.” (Mednick’s emphasis.)

The local attorney then goes on to raise a few questions that the alders may consider when evaluating annual NAA lists. Those include:

• If the nonprofit has received $25,000 or more in the last reporting year, have they submitted a post-project audit prepared by a CPA?

• Have two or more neighborhood organizations, owned by the same entity, received investments which would otherwise qualify for a credit under this chapter, where only one such investment shall be eligible for such credit?

• Have organizations controlled by the same entity exceeded the funding cap of $150,000 per entity? (“No organization conducting a program or programs eligible for funding with respect to which tax credits may be allowed under this chapter shall be allowed to receive an aggregate amount of such funding for any such program or programs in excess of one hundred fifty thousand dollars for any fiscal year,” Mednick wrote.)

• Are the organizations/entities in good standing or authorized to conduct business in the State of Connecticut?

In his opinion, Mednick does not offer answers to those questions.

Based on the Independent’s prior reporting, alders could have debated during the recent Health and Human Services Committee meeting or during Monday night’s full board meeting:

• Should the city hold off on approving state subsidies for Greer’s companies until a federal court decides whether or not those same companies have been committing fraud?

• Does Greer’s apparent domination of all six nonprofits — which applied for a total of $900,000 in state tax credits — mean that his companies are exceeding the state program’s annual $150,000 funding cap per entity?

• Should the city be wary of post-project audits signed solely by Greer’s personal secretary, and that identify tens of thousands of publicly-subsidized dollars as ​“unspent”?

• Should one potential donor’s recent decision to pull $150,000 in contributions from Greer’s companies out of apparent concerns of fraud give the city administration and alders any pause as to unconditionally signing off on $900,000 more in state tax credits?

Those questions weren’t asked or debated Monday night, as leadership told their colleagues to stick to ​“the topic” and say whether they were for or against, period.

State Spokesperson: Local Approval Is ​“Important” & ​“Required”

In a Tuesday morning email response to a request for comment, state DRS spokesperson Jim Polites told the Independent that DRS — which administers the program as the state level — views the annual local legislative approval process as a critical step in how NAA works.

“The Department of Revenue Services administers Neighborhood Assistance Act tax credits based on applications submitted to the agency that meet statutory requirements,” he wrote. ​“A local governing body has the responsibility to hold a public hearing, and then a vote to approve their project applications. Both inputs are important, and required, steps in this process. Applications without local approval do not meet statutory requirements.

“DRS engages with stakeholders from around the state to provide technical assistance on the program. Stakeholders are welcome to reach out directly to DRS with questions about their applications; we are happy to work with them.”

Polites did not say anything about the state’s stance on how much discretion local governments have in approving annual NAA lists. Brackeen said repeatedly during last week’s committee hearing and during Monday night’s full board meeting that alders have reached out to the state for guidance, and have gotten no clear responses.

DuBois-Walton: Take A Stand

Democratic mayoral candidate Karen DuBois-Walton issued a statement over Facebook arguing that the Elicker administration should have done an independent audit before advising that alders approve more tax credits for Greer’s companies.

Mayor Justin Elicker, whom DuBois-Walton is seeking to unseat, has said he was following his staff’s legal advice.

That position, as presented by LCI to the alders, was that the city must rely on paperwork submitted by applicants like Greer without local independent scrutiny.

“Mayor Elicker’s lack of leadership on this issue is striking,” DuBois-Walton wrote. ​“Members of the Board of Alders and administration staff have a disagreement, and there are several plausible interpretations. But rather than making a public stand and taking responsibility for the interpretation of city hall staff, the Mayor has left his staff hanging out to dry.

“The New Haven Independent’s investigation of this issue appears to show evidence of mismanagement and conflicting ownership. Why is it easier for someone being accused of fraud to receive $900,000 worth of tax credits than it is for someone in desperate need of rent relief to receive CASTLE funds?

“If I were Mayor today, I would be pushing for a full financial audit of these properties before giving the city’s approval to any tax breaks.”

On Tuesday, Elicker pushed back on DuBois-Walton’s comment, and on the notion that the city had any substantive say in approving Greer’s companies tax breaks.

“Corporation counsel has reviewed this issue and the City has no authority to deny the applicant, no matter how abhorrent the person’s behavior,” the mayor said.

“It’s unfortunate that the other candidate is lobbing unfounded criticisms at the Board of Alders and my administration, knowing very well we don’t have control over the outcome. All of us agree about the applicant’s abhorrent behavior.”

$3.9M Raised In NAA Donations In Last 20 Years

Now that Greer’s companies have received the final city sign off they needed to participate in the state tax credit program, they need only a final approval by the state Department of Revenue Services before they can begin shopping $900,000 worth of tax credits around to businesses interested in sending money their way.

In recent decades, there has been no shortage of companies interested in doing just that.

The Independent’s review of two decades worth of NAA-eligible contributions and subsequent awarding of business credits showed that, since 2000, Greer’s six local nonprofits — Edgewood Corners Inc, Edgewood Elm Housing Inc, Edgewood Village Inc, F.O.H. Inc, Yedidei Hagan Inc, and Yeshiva of New Haven Inc. — have been able to raise more than $3.9 million in publicly-subsidized donations through this program.

Those numbers give proof to Greer’s claims in a recent declaration filed in federal court in the alleged fraud case that one of the main reasons why he created so many separate nonprofit real estate holding companies in the first place was to maximize government subsidies for housing-rehab work for properties those companies owned.

(The Connecticut Housing Finance Authority and the Neighborhood Assistance Act program ​“cap the amount of tax credits that any given applicant can seek at a time for affordable housing development purposes,” Greer said in that filing. ​“Thus, by establishing the additional non-profits to also purchase, rehabilitate, and well-maintain affordable homes, these real estate holding companies were able to simultaneously obtain more tax credits for their investors, and thus more investments and more buying power to accelerate their community redevelopment project.”)

The Independent’s review of NAA donations and tax breaks also showed that there happened to be a spike in NAA-eligible contributions to Greer’s companies in 2019 — the same year Greer went to prison, and the same year that Mirlis first filed the fraud lawsuit against Greer’s companies.

In 2016, Greer’s companies brought in over $288,600 in NAA-eligible contributions.

In 2017, the same year that a civil court awarded Mirlis a $21.7 million judgment against his former instructor, Greer’s companies brought in only $61,200.

In 2018, they brought in over $69,600.

And in 2019, the year Greer went to prison and Mirlis filed the fraud lawsuit, those companies brought in … nearly $476,000.

And in 2020, after those NAA-eligible donations dropped to $0. Though that, too, is currently being fought over in federal court.

Which companies gave to Greer’s local nonprofits?

Over the past two decades, the biggest donors have been insurance companies and the health technology company IMS Health.

See below for a full list of corporate donors to Greer’s six local nonprofits between 2000 and 2020, sorted by the aggregate sum of contributions made and tax credits received through the NAA program. Click here and here to view the original year-by-year donation reports published by DRS.

IMS Health Incorporated: $410,327.09
IMS Health Transportation Services Corp: $410,327.09
Factory Mutual Insurance Company: $343,903.55
The United Illuminating Company: $254,304.36
Electric Insurance Company: $216,192.00
IMS Contracting & Compliance Inc.: $181,235.92
Arthur A. Watson & Company Inc: $170,000.00
Southern Connecticut Gas Company: $164,571.42
Independence Holding Company: $149,178.08
Brown & Brown of Connecticut Inc.: $145,714.24
Geneve Holdings Inc.: $145,648.57
QBE Insurance Company: $121,428.53
Geneve Corporation: $117,531.18
Boscov’s Inc.: $112,992.81
Guilford Savings Bank: $106,886.62
General Casualty Company of Wisconsin: $97,142.83
Pharmetrics: $75,000.00
Perrigo Inc.: $62,327.28
Louis Brandman and Sons Inc: $60,000.00
Selective Insurance Company of America: $49,363.09
SHW Casting Technologies Inc.: $48,802.95
Praetorian Insurance Company: $48,571.41
Terex Corporation: $44,291.60
York Hill Trap Rock Quarry Co.: $40,964.61
Paul Revere Life Insurance Company: $40,000.00
Connecticut Light and Power Company: $37,500.00
Edge of the Woods: $34,200.00
Sid Tool Co Inc.: $33,671.07
Elmer F. Laydon Construction Corp.: $26,000.00
The L. Suzio Concrete Co.: $22,909.12
Yankee Gas Services Company: $22,064.00
F.J. Dahill Company: $21,350.00
Newman’s Own Inc.: $15,678.86
Dattco Bus Company: $15,000.00
Colonial Life & Accident Insurance Company: $15,000.00
Easter Bag and Paper Company: $14,000.00
Keystone Equipment Finance Corporation: $9,207.11
Ullico Casualty Company: $9,179.31
L. Suzio Asphalt Co Inc.: $6,500.00
L. Suzio Concrete Company Inc.: $6,500.00
United Aluminum Corporation: $6,000.00
Golden, O’Neill & Gephardt: $6,000.00
Andritz SHW Inc.: $5,494.86
CT Telecom Inc.: $5,000.00
Hy’s Livery Services Inc.: $4,250.00
Union Labor Life Insurance Company: $2,702.73
R.C. Bigelow Inc.: $250.00