2010-02-05 / Top Stories

Pols Make 'Slush Fund' Out Of Non-Profit

Watchdog: Meeks, Smith Used Public Funds Improperly
By Howard Schwach

Congressman Gregory Meeks Congressman Gregory Meeks A national watchdog group has charged Congressman Gregory Meeks and State Senator Malcolm Smith with setting up a non-profit organization that they used more like a “slush fund” than a charity.

Published reports in the New York Post and New York Daily News say that the National Legal and Policy Group has filed a state ethics claim against Smith in relation to the New Direction Development Corporation, which was founded by the two local legislators in 2001.

The non-profit, the ethics group says, used both donations meant for the victims of Hurricane Katrina and public funds earmarked by the two legislators to pay for meals, entertainment, consulting fees and IRS penalties.

“When you see lots and lots of consulting fees with large amounts [of money] flashing around the world, at some point one wonders if an elected official is trying to sell his office,” Ken Boehm, the head of the ethics group, told the New York Post this week. “Senator Smith, with respect to New Direction, violated several provisions of New York State law.”

State Senator Malcolm Smith State Senator Malcolm Smith Founded in 2001 by the initiatives of Meeks and Smith, state papers show that Smith’s wife, Michelle, was a founding board member.

Also on the initial board, papers show, was Cathy Green, the wife of Darryl Green, Smith’s former business partner.

Green was convicted in 1999 of stealing $500,000 from city agencies and private firms that hired him as a consultant on affirmative action hiring practices.

He is also a partner, along with former Congressman Floyd Flake, in the Aqueduct Entertainment Group, which was just awarded a $300 million “Racino” deal at the aging racetrack in Ozone Park.

Records show that between 2001 and 2006 Smith helped funnel at least $56,000 to the charity through state earmarks.

City Councilman James Sanders, Jr. City Councilman James Sanders, Jr. “This raises important issues about whether this charity is acting in the public interest or somebody’s political interest,” said Blair Horner, legislative director of the New York Public Interest Research Group (NYPIRG).

Records show that the non-profit’s biggest monetary donation was $250,000 from the International Airport Centers, the developer of a giant cargo facility on Rockaway Turnpike, near John F. Kennedy Airport.

Smith, Meeks and City Councilman James Sanders Jr. are credited with negotiating the deal with the developer for money to be used for community development. That money reportedly went into the coffers of New Direction, the watchdog agency says.

The published reports in the daily papers say that Smith directed that the airport money go to New Direction, but Meeks has long made the airport one of his major priorities, often traveling around the world in the name of airport development.

What, if any community development the money fostered is unclear.

State records show that the money was used for a senior appreciation week, a basketball and jump-rope tournament in Rosedale and a family day.

According to those records, New Direction spent $11,783 for meals and entertainment and $9,904 in Federal tax penalties.

In addition, records show, the nonprofit took in more than $20,000 in Katrina donations, but spent only $1,392 on aiding local families that had been displaced by the hurricane.

In 2004, New Direction took in $272,480, but spent only $100,000 on programs, including grants. The watchdog group said that the remaining money is “unaccounted for.”

In addition, the non-profit did not detail which groups or individuals got the grants.

Austin Shafran, Smith’s spokesperson, denied that the Senator had anything to do with the $250,000 or with the organization itself, beyond helping establish it.

A spokesperson for Congressman Meek’s was not available for comment.

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