THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

While at Harvard, Spitzer met Silda Wall, a fellow-student, on a ski trip to Vermont.

Wall was from North Carolina and had recently been divorced, after a brief marriage to another law student.

She and Spitzer married three years later, in 1987.

They have three daughters, age twelve to seventeen.

Silda worked for many years as a corporate lawyer at Skadden, Arps, then, with some misgivings, gave up her practice to look after the family and her husband’s political career.

She brings a certain politesse to Team Spitzer.

When I met her, she was resolutely composed and on message, except perhaps when talking about the family’s midsummer hike up Mt. Marcy, the state’s tallest peak.

They ran out of water and, as she said, “we had not really thought out the food piece of this.”

They live in one of Bernard Spitzer’s buildings, on Fifth Avenue at Seventy-ninth Street, a half block from the home of Michael Bloomberg, in an enclave of what you might call self-capitalized crossover political talent.

For fourteen years, Spitzer went back and forth between public service and private practice.

He was a clerk to a federal district-court judge, Robert Sweet, and an assistant district attorney in Manhattan, where he helped bust up Gambino control of garment-industry trucking (Spitzer established a fake sewing shop in Chinatown, as a front).

In 1994, he ran for attorney general but came in last among the Democrats, then spent the next several years travelling around the state in a mini-van, cultivating support for another run.

Perhaps the most significant support came from his family.

The 1994 campaign had been funded in large part by a $4.3-million bank loan that Spitzer took out, using as collateral some apartments that he owned; he told the press that he was servicing the loan with his own income.

In 1998, a few days before Election Day, in a nasty race with the incumbent, Dennis Vacco, he admitted that he had been paying off the bank with a loan his father had given him on generous terms.

In effect, he’d received a $4.3-million campaign donation from his father, which is well in excess of family donation limits, and lied about it.

(The Board of Elections declined to investigate.)

Michael Goodwin, a columnist at the News, asked Spitzer why he’d lied, and Spitzer told him, according to Goodwin, “I had to”—a phrase that Spitzer’s detractors have lorded over him ever since, as a kind of shorthand for a streak of dishonesty and hypocrisy.

(Spitzer says that he doesn’t remember any such conversation.)

Nonetheless, after a hotly contested recount, Spitzer won.

To be continued ....

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

Spitzer’s tenure as a state attorney general may be the most heavily chronicled of any in America’s history.

He reimagined the office, inserting it into the void left by a general regulatory retreat by the federal government.

He regarded his activism as a logical and just extension of a new states’-rights movement, which had been conceived as an attempt to roll back oversight and advance a conservative, laissez-faire agenda, but which Spitzer interpreted as an invitation to state-led intercession and prosecutorially mandated policy change.

With great gusto, he went after big polluters, pharmaceutical companies, gun manufacturers, and, most notably, the financial industry, where various harmful and fraudulent practices had taken root—insincere equity research, shady market timing, bid rigging.

As many saw it, Spitzer’s modus operandi was to build a case against his targets, then push the most egregious allegations in the media, which put unbearable public pressure on the targets to settle.

And settle they almost invariably did.

Spitzer earned an impressive array of scalps, admirers, headlines, and plaudits for reform, as well as a coterie of powerful enemies, whose indignation toward his media manipulations, disproportionate tactics, and occasionally shallow understanding of their businesses tended to be drowned out by the widespread public disgust engendered by their greed.

Brooke Masters, in “Spoiling for a Fight,” her 2006 biography of Spitzer, meticulously recapitulates each prosecution—the regulatory turf battles, the legal dekes and dodges, the mutating rationales—creating a portrait of a righteous and far from infallible crusader employing every tactical advantage that his office makes available to him.

He does not always come off well.

(All the same, his parents have the book on the coffee table at their house in Rye.)

His detractors tend to complain that the press created Eliot Spitzer—that the Sheriff of Wall Street, to use one moniker, was a fantasy of the liberal, wealth-resenting media.

And so they take some satisfaction in the fact that the pendulum seems to have swung back on him, with so much force that you’d think it was spring-loaded.

To be continued ....

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

“Day One, everything changes,” Spitzer pronounced during his campaign for governor, as though he’d be taking over the Knicks, instead of one cog in a sprawling and intransigent political mechanism.

The extent to which he has delivered (or, more fairly, will be able to deliver) on this promise depends on whom you talk to and what your definition of “change” is.

As one lobbyist told me, “Day One, everything changes. Day Three Hundred, nothing moves.”

Tracking how Spitzer got into this mess requires forbearance in the face of squalid statehouse wranglings.

The feints and stalemates—combining arid political gamesmanship with fits of pique worthy of “Mean Girls”—tie into a web of purpose and allegiance that can be hopelessly complex, but it helps to know a couple of things.

First, 2008 is an election year.

The Republicans have a thin margin in the State Senate—which they have controlled for all but one of the past sixty-nine years—with seats in vulnerable, Democratic-trending districts.

The Democrats have held the majority in the Assembly since 1975.

If the Republicans lose the Senate, the Democrats will have a monopoly in the state government, and the power to gerrymander districts in their favor, at the congressional as well as the state level.

Also, Joe Bruno would no longer be majority leader.

The Republicans, therefore, are desperate, and in their desperation they have apparently settled on a sand-in-the-gears strategy.

It is not in their interest to help make Spitzer look good.

They seem to have resolved to depict him as angry and unstable.

(“The press somehow confuses intensity with anger,” Bill Taylor, his old roommate, told me. “I see him as a happy warrior.”)

The extent to which they can hurt him, while making it look as though he is hurting himself—and the state—will determine the survival of their party.

To float an analogy that they would not embrace: their predicament is not unlike that of the Sunnis in Iraq.

Second, the entrenched Democrats are uneasy, too.

Spitzer has made them so, both in his challenge to the status quo and in his mishandling of his relations with them.

The political system in Albany favors stasis.

The name of the game, of course, is the preservation of power, which means that whoever has it will rig the game to keep it.

Bruno and Sheldon Silver, the speaker of the Assembly, wield immense power over their conferences; they effectively decide if and when a bill comes to the floor and then tell everyone how to vote.

They dole out what are known as “lulus,” or payments to legislators for extra duties that can be, let’s say, undemanding.

They also disburse their party’s campaign funds, seeing to it that incumbents win more than ninety-five per cent of their races.

The institutions with the wherewithal to provide the money are the oft-maligned but never curtailed special interests.

The leaders excel at harnessing all these stakeholders.

In particular, Silver, who represents lower Manhattan, is determinedly stubborn and patient.

His modest manner disguises a canny parliamentary style.

The contingencies can get so intricate and self-annulling that very little gets done.

To be continued ....

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

Spitzer’s first hostile act as governor—a gentle one, by Spitzer standards—occurred in his inaugural speech.

“Like Rip Van Winkle,” he pronounced, “New York has slept through much of the past decade while the rest of the world has passed us by.”

The remark, evocative and accurate as it may have been, struck many present as indecorous, disrespectful not only of George Pataki, his predecessor, who was in attendance, but of Bruno and Silver, the presumably somnambulant collaborators, who were seated right behind Spitzer.

“That was a cheap shot,” Jack McEneny, a Democratic assemblyman, told me.

“Save it for the Bronx Democratic dinner.”

Of course, comportment was not high on Spitzer’s priority list.

To break the stagnant culture of Albany, he intended to do away with the rhetoric, as well as the practice, of accommodation.

He would relish the disjointing of noses.

“Any controversies largely come down to this once-in-a-lifetime effort to break the culture,” a senior aide told me, meaning not just that of the legislators but also that of their complements: the Albany press, the union leadership, the executive directors of the state agencies.

“You teach people lessons and force people to do it a different way.”

The disdain that Spitzer and his aides had for the niceties of the capitol caused early offense.

The legislative staffs complained that Spitzer’s team didn’t know their names or titles.

Deference had been replaced by indifference.

“It makes no sense to squander good will when it’s there for free,” one legislator said.

“The problem is arrogance.”

Spitzer is fond of saying that politics is like a sporting contest: you go out, play hard, and shake hands when it’s over.

He cites Theodore Roosevelt’s invocation of “the arena.”

Of course, for most of his colleagues, politics is not a game but a livelihood.

“Tip O’Neill said all politics is local,” McEneny said.

“In Albany, I say, all politics is personal.”

Pete Grannis, a former assemblyman from Manhattan who now heads Spitzer’s Department of Environmental Conservation, told me, “The leaders, by design or fatigue, have devolved into accommodation mode."

"Pataki sort of wore out.”

The legislators, he explained, “have a very parochial focus on survival."

"And fundraising is the third rail."

"I told the Governor, ‘The Legislature is like your in-laws.'"

"'You’re stuck with them.’ ”

To be continued .....

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

Right away, Spitzer got into a fight with the Democrats over the appointment of a successor to Alan Hevesi, the state comptroller, who had been forced to resign after pleading guilty to using state employees as chauffeurs for his ailing wife.

The Legislature was empowered to choose a successor.

Spitzer wanted someone he deemed qualified, rather than a machine hire.

But Silver prevailed, choosing one of his own assemblymen, Thomas DiNapoli, and Spitzer, furious, began paying recriminatory visits to the districts of some Democratic legislators who had voted with Silver (and who had supported Spitzer’s own campaign), questioning their integrity as well as their standing come primary time.

“The temper tantrum that occurred after the DiNapoli affair did almost irreparable harm to the relationship between the Governor and the Democrats in the Legislature,” McEneny said.

“There were a lot of hurt feelings.”

There are people on Spitzer’s team who consider the DiNapoli ruckus to have been one of their finest hours.

It is hard for them to see how anybody could object to their insisting on competence.

Spitzer, though, seems to realize that it was at least a short-term tactical error.

“Let’s face it—it was not a good beginning for my relationship with the Legislature,” he told me.

“I may have had the moral high ground, but having the moral high ground didn’t help with Albany relations.”

Meanwhile, Spitzer was working to overthrow the Republican majority in the Senate.

The Republicans’ margin has been slipping, and a few of its senior members, from districts that otherwise lean Democratic, are in their mid-seventies.

Historical inevitability hangs over Bruno, a former boxer who is seventy-eight years old and in his sixteenth term in the State Senate, as does a federal investigation into a consulting business that he runs out of his home.

(He has denied any wrongdoing.)

Spitzer sought to hasten things.

He or his staff made overtures to several Republican legislators, offering them jobs in his administration, which would come with higher salaries and better pensions, if they gave up their seats.

One Long Island Republican signed on to be his homeland-security chief, and Spitzer successfully campaigned for a Democrat to replace him.

This narrowed the Republican majority—and Bruno’s hold on power—to two seats.

Such incursions have long been all but proscribed in Albany; Bruno told me that Spitzer had been “bribing several of my members” and “dishonest.”

Once again, however, it was difficult for Spitzer and his aides to understand how, on the merits, there could be anything wrong with going after the opposition party.

Never one to hold his tongue, Bruno began publicly disparaging Spitzer, calling him a rich spoiled brat and a bully.

Spitzer, more measured in public, slipped up in private, as when, according to one person familiar with the exchange, he said to a legislator, in the course of calling attention to his own respect for decorum, “I could have called Bruno a senile piece of s***, but I never did.”

Amid these squalls, the two men, with Silver, were trying to forge a budget deal.

Early on, Spitzer had managed to pass some bills that Bruno had long advocated anyway; Spitzer’s job, as Bruno saw it, had been to “roll” Silver.

But then Spitzer, in an attempt to cut medical spending, took on 1199 S.E.I.U., the giant health-care-workers union, which is a longtime kingmaker and one of the Senate Republicans’ major backers.

(Big unions in bed with the Republicans? Only in New York, kids, only in New York.)

“We gored the ox of the patron of the Senate,” as one aide put it.

The union spent almost five million dollars—an extraordinary amount—on television advertisements attacking Spitzer, prompting him to counter with an ad blitz underwritten with his leftover campaign funds and five hundred thousand dollars of his own money.

Still, for the first time, his poll numbers started to fall.

To be continued ....

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

To some astonishment, the three men managed to come to an agreement on a budget by the April 1st deadline, but they did so in a closed-door session that gave rise to bitter complaints that Spitzer had condoned and participated in the kind of secrecy that he had promised to eliminate.

What’s more, he had compromised on several big items, including Medicaid spending and school funding, for which he was also criticized.

But this was just a prelude to the most insidious diversion from what the professionals like to call the business of governing: Troopergate, a.k.a. Choppergate, the Dirty Tricks Scandal, Eliot Mess, or, to some of Spitzer’s team, “the recent unpleasantness.”

It has given rise to a set of opposing interpretations, the merits of which are still contested.

What is uncontested is that it has been devastating to Eliot Spitzer.

Being on the receiving end of prosecutorial curiosity has exposed Spitzer to the kind of public rush to judgment that, as attorney general, he used to exploit, and he has handled it with the kind of cautious evasion that he used to deplore.

Troopergate, judging from subsequent investigations, began last spring with an inquiry, from several newspapers, into a fund-raising trip that Spitzer had made to California.

The papers wanted to know whether he had flown on the state plane.

The Governor and the leaders are allowed to use the plane and two state helicopters if the purpose of the trip is state business, but using them for personal or fund-raising purposes is a breach, albeit a time-honored one.

(Mario Cuomo, for example, had an Air Cuomo scandal, involving numerous flights that his wife and kids took when he was governor.)

Spitzer hadn’t used the plane on that trip, but Darren Dopp, his communications director, decided to look at additional flights, including those made by the lieutenant governor, David Paterson, and Joseph Bruno, because, he told investigators, of continued interest from reporters, which he anticipated would lead to follow-up Freedom of Information requests.

He didn’t have the kind of information about Bruno’s day-by-day schedule and appointments that he did about Spitzer’s and Paterson’s, so Dopp—and here’s the rub—asked the state police to collect whatever they had.

So, rather than just pulling records, they were, in some cases, creating them retroactively and, at the same time, learning a lot about what Bruno was up to.

The police delivered reports to Dopp that suggested that Bruno’s flights might be improper, if not necessarily illegal.

For example, there was an overnight trip, with a fund-raiser in the evening and a bit of state business in the morning, requiring separate round-trip helicopter flights (at thousands of dollars a flight).

Dopp took the information to Spitzer and top members of his staff, and they decided to sit on it; as Spitzer and his staff knew, the laws governing the use of the plane were lax.

But then James Odato, a reporter at the Albany Times Union, made a Freedom of Information request for the travel records, and Dopp, again after consulting with Spitzer and his top staff, furnished the information to Odato.

It isn’t clear to what extent Odato’s inquiry was self-generated.

Odato had done stories on government travel before, but e-mails released by investigators suggest that Dopp may have been shopping the story around.

It’s hard not to suspect, anyway, that Dopp was looking to hurt Bruno, and that he wouldn’t have done so without his boss’s blessing.

Whether that constituted “a desire to run state government as a dictatorship,” as Bruno would later assert, or merely an instance of hardball politics is now a matter of interpretation.

(It could be both.)

Nonetheless, the plan, if it was one, backfired.

It tarnished Spitzer’s image, among the many citizens who had not yet questioned it, as an upright avatar of fair play, and transformed Bruno from the heavy into the victim.

To be continued ....

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

When the Times Union story about Bruno’s trips ran, on July 1st, Bruno reared up.

“I told the Governor directly I have dealt with bullies and rogues and thugs most of my life, O.K.?” he said.

“I grew up in the toughest part of Glens Falls, next to the boxcars, where kids would come up to you when you weighed ninety pounds and they weighed a hundred and twenty and just punch you right in the mouth just because you were Italian, O.K.?"

". . . So swing away.”

(Glens Falls isn’t the Bronx, but it would have to do.)

Within days, Bruno managed to alchemize the allegations into a story about a surveillance campaign and an abuse of power.

Andrew Cuomo, Spitzer’s successor in the attorney general’s office—a fellow-Democrat but no dear friend—opened an investigation.

Spitzer’s lawyers, taking a cautious legal stance, and perhaps worried that Cuomo was out to get them, decided not to let Spitzer’s staffers talk to Cuomo’s investigators.

Their meagre coöperation—Spitzer subsequently said they had “fully cooperated”—seemed to harden Cuomo’s stance.

(Cuomo, out of both temperament and ambition, seems to have modelled his approach to state prosecuting on Spitzer’s.)

Cuomo issued his report after three weeks, and it was harsh.

Although it absolved the Spitzer team of any illegality, it excoriated them for essentially deploying the state police in a political hit.

Dopp was put on unpaid leave (he has since gone to work at a lobbying firm), and Spitzer published a self-flagellating Op-Ed piece in the Times, “An Apology from Albany,” in which he said, “What members of my administration did was wrong—no ifs, ands or buts.”

Still, he had said that the mistakes were his staff’s, and that he himself had known nothing about any attempt to smear Bruno.

Since then, Troopergate has settled into a tense legal standoff involving unanswered subpoenas and claims of executive privilege.

The Albany County district attorney took up the case, as did the Commission of Public Integrity and the Senate.

The Albany D.A.’s report, released in September—on the same day that Spitzer announced his driver’s-license initiative—was mild enough in its conclusions to prompt Bruno to dismiss it as a whitewash.

The Republicans, and the majority of New Yorkers polled, want Spitzer to testify under oath about who knew and did what when, but Spitzer has yet to do so because, he says, he hasn’t been asked to:

“I’d love to."

"Wish I had when this first came up.”

He regards the case as “a ridiculous detour,” the aftermath of which may have been handled poorly, at least to judge by the results.

When I asked him, for example, if it was a mistake for his lawyers not to have allowed his aides to talk to Cuomo, he said, “It certainly didn’t play out wisely."

"No question about that.”

During the summer, in the absence of any actual legislative work, the saga occasionally turned surreal.

There was an improbably sourced but entertaining report in the Post that Spitzer aides were holding secret meetings in black Town Cars, riding around the outskirts of Albany, to avoid using e-mail or the phone.

One night, an anonymous caller left a threatening recorded message for Spitzer’s father, who is eighty-three and suffering from Parkinson’s.

Referring to the old campaign-finance allegations, the caller said, in part, “You will be arrested and brought to Albany."

"And there is not a goddam thing your phony, psycho, piece-of-s*** son can do about it.”

A private investigator traced the call to Roger Stone, a Republican political consultant and former Lee Atwater associate who had been hired by the Senate Republicans.

Stone denied making the call and cited as an alibi his attendance at the play “Frost/Nixon.”

(Stone got his start working for Nixon, and appeared in the New York Observer after the call, showing off a Nixon tattoo between his shoulder blades.)

But then it emerged that he’d been at the play on a different night.

He still denies making the call, claiming that the voice in the message is that of an impersonator.

“It was shocking for two reasons,” Spitzer told me.

“One, that they would do it."

"And, two, how bizarrely obvious they were in what they did.”

He added, “Imagine if I had done that.”

In a way, Troopergate has become a sort of Rorschach test: each constituency sees in it what it wants to see.

For the Spitzer team, it’s both no big deal and a symbol of monumental pushback.

For the Republicans, it’s both a dastardly conspiracy to destroy them and a cudgel for their self-preservation.

For the press, it’s the best evidence yet of incompatibility, and a source of new scoops.

As a veteran of bygone Albany wars explained to me, “Eliot’s gotten down in the mud with these guys, and they know how to fight in the mud."

"They’re not there because they’re nice guys."

"They’re there because they’re great tactical politicians.”

To be continued ...

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

As for Cuomo, he may as well have announced his candidacy for governor in 2010.

Cuomo, the son of the former governor Mario Cuomo, who was a Secretary of Housing and Urban Development in the Clinton Administration, ran unsuccessfully for governor five years ago.

It can be dangerous to ascribe envy or covetousness to a man without being able to know his mind, but people do so to Cuomo all the time; they also surmise that it rankled him that Spitzer declined to endorse him in the attorney general’s race until after the primary.

As an Albany lobbyist told me, “We all expected Cuomo to do something like this, but thought he’d maybe wait two and a half years.”

In October, while on the plane with Spitzer, I asked him whether he still talked to Cuomo.

“Of course."

"He’s my lawyer,” he said, with a mischievous grin.

I asked if their conversations were therefore privileged.

“Yes, even the expletives are privileged,” he said.

“That was a joke,” Spitzer’s aide said.

“No, it wasn’t,” Spitzer said.

To be continued .....

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

Bruno went on, “He is the biggest disappointment that I’ve had in thirty-one years of serving in political life, because I liked him on a personal level."

"He fooled me."

"And I’m pretty good with people, I have a good intuition with people."

"He fooled me, he hoodwinked me."

"And I’m embarrassed."

"He told me I was going to be his partner."

" . . . ‘We’re going to get all kinds of productive and constructive things done.'"

"'Shelly Silver’s a problem; he’s not my kind of guy.'"

"'I’ll deal with Shelly.’ ”

Bruno, who called Silver “the biggest wimp on this earth” (Silver has adopted a sticks-and-stones approach to Bruno’s provocations), mentioned the series of bills that he had favored and that Spitzer had got passed.

“Then what does he do?"

"Now that he’s on a roll, suddenly he’s a hero, he worked miracles—what did he do?"

"In my mind, his ego took over, his temperament took over, he started believing all his own press clips that he walked on water, that he was the savior of all mankind.”

I asked him when they started yelling at each other.

“When he said, ‘I’m taking Bruno out as leader and we’re taking over the majority,’ ” he replied.

He recalled an incident involving the Senate minority leader, Malcolm Smith (“the wimp that he is”), who had been echoing Spitzer’s predictions of a Democratic takeover and whom Bruno had then pilloried.

Spitzer called Bruno into his office.

“So I went in,” Bruno said.

“He’s sitting there like this.”

He pantomimed Spitzer’s expression—chin thrust forward, eyes glaring—in a manner that made it clear that he does not like Spitzer’s face.

“Christ . . . So I said something like ‘What’s up?’"

"He comes out of his chair, practically: ‘I’ll tell you! You abused Senator Smith on the floor of the chamber!’ ”

He gave Spitzer a whiny voice.

“ ‘Malcolm Smith’—that’s when I said, ‘Malcolm Smith’s got his head so far up your ass he can’t even see straight.’"

"He went crazy—screaming and shouting."

"Closest I’ve ever come to seeing something like that is a seven-year-old kid having a tantrum."

“He’s a bully,” Bruno said.

“A spoiled brat having a tantrum because he’s not getting his way.”

As for the dishonesty part, he cited Spitzer’s campaign-finance troubles, and the fact that Spitzer had gone after his members after he’d promised him that the two of them would be partners.

“All this time he’s cooking up how to bury me with the state police,” he said.

“If proven, it would have been criminal."

"I could’ve been in jail!”

What, then, would the Governor have to do in order for there to be peace between them?

“We have to get him to just tell the truth, and I’ve given you instance after instance where he doesn’t tell the truth,” he said.

“Sorry, I feel strongly about this, and the fact that I got a huge pain in my ass doesn’t help."

"I should keep this pain all the time.”

He got up and limped over to the reception, in a new annex whose construction owed a lot to funds corralled by Joe Bruno.

Along the way, one of the caterers told him that he looked great, and he beamed.

To be continued ....

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

“Maligning Albany is a very old game,” the novelist William Kennedy wrote in the introduction to “O Albany!” his 1983 book of essays about his home town.

Nonetheless, he does not refrain from playing it.

Calling the town “a pinnacle of porkhead bossism,” he writes, “Wickedness has been our lot for more years than any man alive can remember.”

Several things about Albany strike the downstate newcomer.

Near the capitol building, at least, it seems to be one of the last American towns, outside the District of Columbia, where most of the men wear suits.

It can feel like a city full of detectives and bodyguards.

The capitol is a stunning Romanesque-Renaissance-Second Empire mashup, a monument to a more grandiose era of New York governorships, when the second floor’s principal occupant routinely went on to big things on the national stage.

It was completed under Teddy Roosevelt, at a cost of twenty-five million dollars, and was widely considered to be a boondoggle.

The cavernous waiting room outside the executive chamber is known as the War Room; the builders ran out of money to put up a tower but built a vaulted ceiling that was painted with bloody images of hand-to-hand combat through the ages, which seem to suit the place.

Across the street from the capitol is Empire Plaza, also known as Rockefeller’s Folly, a sprawling waste of modernist architecture that reflects a period of gubernatorial supreme command.

Beneath it run a series of tunnels and concourses connecting the various government buildings, and from January to June, when the Legislature is in session and the budget is in play, the political professionals take to the catacombs, a race of disingenuous horse-trading troglodytes haunting the fast-food pavilions.

To be continued ...

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

When I was in Albany, earlier this fall, the legislators had returned to town for a special session.

After they’d dispersed at the end of the regular session, in June, with work undone, Spitzer had gone on a kind of taunting tour of the members’ districts, where he delivered a PowerPoint presentation whose theme was “Where’s Waldo?”

Weeks later, he, Bruno, and Silver reached a tentative agreement on a raft of big initiatives, each dear to one man or the other.

(For Spitzer, it was campaign-finance reform; for Bruno, it was Mayor Bloomberg’s congestion-pricing plan; for both Bruno and Silver, it was property-tax relief for seniors and a pay raise for legislators.)

The special session would not include a debate or a vote on any of these initiatives; instead, the Senate Republicans wanted to make a stand on the driver’s-license issue.

On Monday afternoon, a bell rang feebly throughout the halls of the capitol, summoning the senators to their chamber.

They convened at 3 P.M.—a starting time fit for a session musician.

The Republicans wandering in and out of the Senate chamber were fairly exuberant at the ammunition Spitzer had given them.

As Fredric Dicker, the Post’s longtime Albany editor and the press corps’s most persistent Spitzer scourge, noted on his radio show the following morning, “It’s been years since I’ve seen the kind of glee on the part of Republicans that we saw here yesterday.”

The problem for Spitzer, and for the citizens of New York, is that the actual substance of state governance (the policy) and the application of it (the politics) are numbing.

Health-care-reimbursement formulas, county-government structure, development-agency debt structure: these are not the things that capture a citizen’s—or an editor’s—imagination.

One of the advantages to having them disputed and decided in an arcane company town, a hundred and sixty miles from the state’s media center, is that voters don’t need to muddle their minds with the details.

A disadvantage is that all manner of fainthearted, small-minded, cynical, greedy transactions occur out of sight.

Most of the legislators and their staffs live in Albany during the session, owing to its distance from their home districts, which engenders a hothouse atmosphere, reflected in what Spitzer one afternoon called the Bear Mountain Bridge Rule, a precept named for a Hudson River crossing an hour north of Manhattan: what goes on north of the Bear Mountain Bridge stays north of the Bear Mountain Bridge.

(Unfortunately for two legislators who got caught up in staffer sex scandals a few years ago—and fortunately for tabloid readers downstate—this imperative turned out to be a porous one.)

This winter, a contentious budget season looms.

Wall Street, which furnishes up to twenty per cent of the state’s tax revenues, has had a rough year, thanks to the subprime-mortgage mess, so unpopular cuts will make for spirited scapegoating.

The legislative elections, next fall, will heighten the gamesmanship and the battle over public perception.

In Albany, I met with Paul Francis, the budget director, who was attempting to reconcile the seeming impossibility and absolute necessity of getting a budget done.

“One of the things I learned in business is the importance of having a coherent message about what you stand for,” Francis said.

On the second floor of the capitol, I met with Dennis Whalen, Spitzer’s deputy health secretary, who also served under Pataki.

“Albany’s acting how you would expect it to act: the organism is marshalling its antibodies,” he said.

Of the Spitzer agenda, he added, “Is it a virus?"

"It may be the cure.”

Bruce Gyory, Spitzer’s new special aide, recently urged the Governor to read a biography he’d found, at the Strand, of Charles Evans Hughes, a governor who, a hundred years ago, went to Albany and, despite many early setbacks, managed to pass the Moreland Act, which he used to go after corruption.

“Here’s a guy who came in on a wave of reform."

"He challenged the status quo, and the status quo didn’t like it."

"He ran into problems,” Gyory told me.

“It’s so much easier to be a go-along, get-along governor than it is to confront.”

But, he added, “the power of the chief executive is the power to persuade."

"I have told him, the operative word in bully pulpit is ‘pulpit.’ ”

To be continued ...

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

Al Smith, whom Spitzer often cites, was actually voted out after his first two years, but won again two years later, and went on to transform the office.

But, like other New York governors who found their footing, he thrived.

“The notion that you’re doomed if you don’t get it done in your first year is an ahistorical analysis,” Gyory said.

Executive-branch history is strewn with lousy first years.

People often compare Spitzer with Rudy Giuliani, for his aggressive tenure as a prosecutor and for his combative, enemy-strewn governing style.

But there are other useful analogues: Michael Bloomberg, whose billionaire’s scorn for political ritual and collaborative capital in his first two years earned him abysmal public-approval ratings; Bill Clinton, whose ill-advised or poorly handled initiatives (gays in the military, health care) derailed his first-term agenda and handed Congress to the Republicans; and Teddy Roosevelt, another hard charger, whose confrontational ways as governor so infuriated the powers that be in New York that they had him drafted as President William McKinley’s running mate, just to get rid of him.

Each instance casts Spitzer’s prospects in a rosy light, predicting renewal and some measure of historical vindication.

But there are counterexamples.

In October, the Times summoned the ghost of William Sulzer, a first-year governor from Manhattan, who, in 1913, was impeached and removed from office, after too zealously attacking the corrupt Tammany Hall Democratic machine.

Like Spitzer, Sulzer said, “I am a fighter,” and tried to appeal directly to the voters, rather than to their representatives.

“If I could tell you some things I know about Albany conditions, it would make you want to come out with a rope in your hands,” Sulzer said.

His disregard for the nuances laid him low.

Another analogue is President Bush, who is very different from Spitzer in most ways—temperament, ideology, fluency, firepower—but who also has the courage of his convictions, naysayers be damned.

It is a comparison that Spitzer inadvertently invited, in an address he gave in August, two weeks after the release of the Cuomo report, at the Chautauqua Institution, in western New York.

Spitzer invoked Reinhold Niebuhr, who “understood that the exercise of power can be shocking and, at times, corrupting."

"But he also understood that power is absolutely necessary to fight the battles that must be fought."

"The trick is to fight these battles with humility and constant introspection, knowing that there is no monopoly on virtue.”

He was talking about Bush, he emphasized, not himself.

“President Bush didn’t understand that humility has to be more than just a talking point,” he said, before going on to enumerate his own accomplishments.

It was a remarkable exercise in expiation by indirection.

To be continued ...

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

In late October, Spitzer’s press office sent out a release saying that Spitzer was preparing a major surprise announcement at an appearance at N.Y.U., on the driver’s-license issue.

Might Spitzer be dropping the plan?

Suggesting such a thing to the reporters who regularly cover him inspired a no-chance-in-hell double take.

Still, by that point opposition had crescendoed.

Lou Dobbs, on CNN, had been assailing Spitzer on a nightly basis.

(“How about a spoiled rich-kid brat who is treating New York residents as if he thinks they’re his rich father’s tenants, instead of citizens? . . . He may be what he calls a steamroller, but I think he’s a weak-kneed, spineless steamroller.”)

And county clerks around the state, the ones responsible for issuing driver’s licenses, were threatening civil disobedience.

Broader discontent had spread to his own party.

“We’re hoping for a change of direction,” McEneny, one of the Assembly’s recalcitrant Democrats, said.

“It’s getting real late.”

It turns out, however, that the surprise was merely the announcement that Richard Clarke, the counterterrorism expert, had endorsed Spitzer’s plan.

Afterward, I rode along with Spitzer and Rich Baum, the secretary to the Governor, on their way to a lunch with Brooklyn Democrats in Williamsburg.

“Clarke was hugely important,” Spitzer said.

“He indisputably puts to rest the notion that at the security level this is not the right thing to do.”

But it was too late.

The plan’s indisputability, in whatever platonic realm Spitzer had deemed it so, was very much in dispute in the arena.

Baum said, “We didn’t make an emotional argument, because we didn’t have an emotional argument."

"It’s a cerebral issue.”

“Every issue where we’re a minority is a cerebral issue,” Spitzer said to Baum.

I asked if they’d anticipated this much emotion.

“Remember that Monty Python skit?"

"‘Nobody expects the Spanish Inquisition,’ ” Spitzer said.

He hadn’t watched Lou Dobbs, but he’d seen some transcripts.

“I ignore it."

"Honestly, I ignore it."

"If there was a serious intellectual response to him, I would think about it very deeply."

"If it is essentially an ad-hominem attack, I don’t care.”

One night, Spitzer’s office arranged for us to meet for a drink rather than talk in his office.

This surprised me, since Spitzer is not an after-work-drink kind of guy.

That weekend, he had gone down to Washington, D.C., and cut a deal with Michael Chertoff, the Secretary of Homeland Security, in which, once again without telling anyone, Spitzer had back-pedalled on his license proposal: now the license that illegal immigrants could get would, in effect, be a limited one—for example, you couldn’t use it to get on a plane—and New York would comply with the Bush Administration’s plan for a federal Real I.D., an enhanced form of identification that has prompted misgivings among liberals and libertarians alike.

In short, he had abandoned his supporters on the license proposal and also handed the Bush Administration a political gift.

And his opponents weren’t sated.

If anything, they were emboldened.

We met at E.A.T., a gourmet food shop on Madison Avenue, around the corner from his apartment.

A pair of black Suburbans pulled up, and he bounced out of the first one, fresh from an appearance on “Hardball,” where he had parried Chris Matthews’s barrage of moderately hostile license-debate recapitulations with generously uninterrupted on-message clarifications.

We found a table in the back, where he learned, with some disappointment, that E.A.T. didn’t serve Scotch.

(I had suggested Bemelmans Bar, at the Carlyle, but Spitzer had frowned: not his scene.)

He ordered a glass of white wine.

Talking again about the license plan’s merits, he said, “If we can get the public to focus—forget the rhetoric on both sides—focus on this as just rational policy.”

I asked him if at this point he was just playing for a draw.

“If I knew what I was playing for, it’d solve a big problem,” he said.

He received a message on his BlackBerry: a text of remarks that Mayor Bloomberg had made, moments earlier, on CNN, in which he had condemned Spitzer’s license policy.

The Governor betrayed no disappointment or annoyance.

“Here’s the reality: reform is a messy process."

"I went up to Albany with the avowed purpose of changing the way things were done."

"Some of the folks there don’t want us to do that."

"They’re pushing back, holding on for power,” Spitzer said.

“But you know what?"

"It takes time, and there’s enormous pushback."

"And so anybody who thought it was going to be pretty—and I’ll say something now that I probably shouldn’t."

"It’s not because I’ve had two sips of wine."

"Editorial boards desperately want reform but yet desperately don’t want the discomfort of seeing people fighting."

"And so there is a sort of a schizophrenia."

"They see us fighting and they say, ‘Can’t you guys get along?’"

"Well, the answer is, you know, maybe not.”

He had another sip of wine.

“None of this is personal to me."

"In other words, no matter what has been said, I like Joe Bruno."

"I mean, it’s a crazy thing for me to say."

"I was on the phone with him last week."

"We had a great chat."

"We had the most wonderful chat we’ve had in the years I’ve known him.”

(A spokesman for Bruno said of the call, “It was about a personal matter; it had nothing to do with the business of governing.”)

“Joe’s trying to hold on to power,” Spitzer said.

“That’s fine."

"I would do the same thing if I was in his position."

"The media says, Oh, Spitzer, you went to Albany, you were going to change everything."

"It’s October."

"What’s happened?"

"My attitude is, Guys, I’m playing for the long game."

". . . I’m patient."

"I don’t look it."

"I don’t act it."

"You know what?"

"I’m disciplined to know this isn’t a one-inning game."

"And I’m learning that."

"I’m learning that.”

Spitzer had taken to likening the job of governor to “three-dimensional chess.”

To be continued ...

THE NEW YORKER

"Profiles - The Humbling of Eliot Spitzer - The Governor’s rocky rookie season." (cont'd)

by Nick Paumgarten

December 10, 2007

He went on, “I feel sometimes like I’m sinking into quicksand and subjected to the very significant—and sometimes appropriate—critiques of editorial pages about missteps, which I read, and, like any normal person, mutter under my breath and resent, but then take seriously."

"And trust me."

"Don’t take any of this to suggest that I don’t think we’ve made mistakes."

"My attitude is I will never deny we made mistakes.”

He is ever mindful of the example of George W. Bush, who infamously, at a 2004 press conference on the Iraq war, couldn’t think of any mistakes he’d made.

(“That made me cringe,” he’d told me.)

“Will you discuss the mistakes?” I asked.

“No."

"I learned that lesson the hard way."

"I was with an editorial board one time, and they said, Did you make a mistake doing this or that?"

"I said, Yeah, I should have done it this way."

"And I thought I was showing them that I had some capacity to be introspective—which I may or may not have, but I thought at least I’d fooled them on the issue."

"And, the next day, screaming headlines, ‘Spitzer Admits Mistake.’"

"So I’ve learned.”

He went on, “We have a long time horizon, so I don’t worry about the ups and downs.”

By November, Spitzer had begun to entertain private doubts about the feasibility of the license plan.

The first inkling came when, shortly after the Chertoff compromise, he had a sit-down with the “specialty media”—editors of Hispanic, Irish, Indian, and Chinese newspapers, among others—who told him that a lower-tier license would be a “scarlet letter.”

And if they would not sign up for it, then it became even harder to justify.

“It was a remarkably successful political maneuver that left me standing in the middle with enemies on both sides,” he reflected later.

“I had a tsunami coming from one side and a hurricane coming from the other, and it was not a healthy situation to be in.”

On November 6th, Spitzer gathered his core staff at his farm in Columbia County, to talk about a number of pressing issues.

The last item on the agenda was the driver’s-license policy.

He asked his staff, “What’s the move?”

Some said stick it out.

Others said let it go: it clearly was impeding their ability to get other things done.

Spitzer emerged still committed.

On a subsequent trip to Puerto Rico, he made a few philosophical comments about the nature of policymaking that indicated to reporters that he might be wavering.

He told me that his words were misconstrued, but admitted, “The fact that I made those comments reflected that I was going through internal evaluations”—a rare acknowledgment of the existence of the unconscious."

He spent a day at the beach with his wife, their first day off together in months, and mulled it over some more.

It was, according to his staff, a wrenching process, although he was loath to admit it (“Look, I don’t torture myself over decisions,” he told me), not only because he felt that he was right, in policy terms, but because, according to the laws of dinner-table family argument, being right about being right is as important as being right.

Political expediency, for better or worse, is not a principle he holds dear.

However, on conference calls with his core staff over the weekend, he discerned that the mood had shifted: there was something approaching a bag-it consensus.

Also, a few days hence, the Democratic candidates for President would be debating in Las Vegas.

Hillary Clinton’s equivocations on the subject of Spitzer’s plan, in the previous debate, had wounded her campaign.

On Tuesday morning, Baum, the secretary to the Governor, spoke with a representative from Clinton’s campaign, who asked what the Governor’s latest thinking was on the license issue.

Baum said that the Governor had already changed his mind.

Spitzer’s staff had been surprised that the Clinton campaign hadn’t called earlier.

His communications director, Christine Anderson, told her counterpart on the Clinton campaign, Howard Wolfson, “You’re going to get blamed for it.”

Apparently, it was a misconception that the Clinton camp could live with.

That afternoon, Spitzer called Clinton to let her know his decision and flew down to Washington, in the state plane, to announce his retreat, on terms that might flatter him.

He continued to defend the policy, on the merits, and then assailed the federal government for failing to act on immigration and also criticized his opponents for their hysterical rhetoric:

“The consequence of this fearmongering is paralysis.”

He had exhibited a new grasp of that old political talent: extracting oneself from an intractable position.

That is, he had caved.

Two days later, I visited him in his office.

The night before, he’d gone to a Bruce Springsteen concert in Albany with his old friends Bill Taylor and Cliff Sloan, and he’d been heartened by Springsteen’s encore, a number about immigrants called “American Land.”

“I thought he was going to add a line like ‘Don’t they all need driver’s licenses?’ ” he said.

“But somehow it wasn’t there.”

During the concert, he had checked his BlackBerry and learned that, at the debate in Vegas, Clinton, as expected, had said she was opposed to his discarded plan.

Referring to his turnaround, he said, “The problem that people have attributed to me is one of hubris, arrogance, unwillingness to shift, listen, and respond."

"But I did it because we are responding."

"We are listening."

". . . Look, I may not appear to listen, but I do.”

Plus, he went on, “you’ve excised a cancer that had been fundamentally debilitating to our ability to move the agenda.”

Within days, the furor went into remission.

The Post, moving on, ran a story about Spitzer’s appearance at a private fund-raiser in Greenwich Village.

A witness told the Post Spitzer had declared that if the Democrats took the State Senate legalizing gay marriage would be one of his highest priorities.

Spitzer denied it (he said he’d merely complimented the Assembly on its passage of a gay-marriage bill), but, sure enough, the Republicans picked up the gay-marriage drumbeat.

By last week, Spitzer seemed to have settled into a lumps-taking, amends-making phase—one as unfamiliar as it is likely to be short-lived.

After meeting with a gathering of Democratic assemblymen, whom he’d asked for another chance, he told me, “It’s like I am merely an object being moved, subject to poking, pushing, like an unknown in a science lab."

"Everyone’s trying to push at you, figure out ‘What is it?’ ”

“When I was a prosecutor, we had a much greater opportunity to reflect on every decision,” he had said earlier.

“The pace of decision-making and the range of decision-making was slower."

"And much more under control."

"You are, by and large, the actor who determines pace, timing, substance, et cetera."

"You control the pace of the game."

"In this job, a great deal comes at you, and so you’re thrust into positions where you’re reacting."

"And just the scale, obviously, makes it more likely that you’re going to have decisions that go awry."

“I don’t believe that at age forty-eight that you become, overnight, a transformed person,” he said.

“But is there a different sense of how we have to work with folks?"

"Yes.”

http://www.newyorker.com/reporting/2007/12...n?currentPage=1

"Higher education plan gains support"

By MICHAEL GORMLEY, Associated Press

Last updated: 6:02 p.m., Monday, December 17, 2007

ALBANY -- A wide-ranging plan to make New York higher education among the best in the world and an engine for jobs gained some early support Monday by business and education reformers as well as the groups that would benefit from the massive spending plan.

"We need a system that rises above the average, that competes at the top national level," said Kenneth Adams of the state Business Council.

"We need a superior state system to regain the ground we've lost to other states."

The report presented to Gov. Eliot Spitzer Monday by the state Commission on Higher Education calls for 2,000 more full-time faculty at the State University of New York and City University of New York, a $3 billion research fund, the recruitment of 250 top scholars over five years, several programs to make public and private college more affordable, and a "educational partnership zones" in low-income neighborhoods in which colleges would help high schools prepare students for higher education.

Under its many proposals, SUNY and CUNY schools would be able to set their own tuition levels based on the demand for entrance and their needs.

The commission also supports regular, predictable increases in tuition that supporters say help families and colleges plan better.

The commission also calls for cooperative ventures between public and private colleges.

The report ( http://www.ny.gov/governor/ ), doesn't say how billions of dollars should be raised to pay for the hiring and programs to develop research that translates into jobs and what Spitzer has called an "innovation economy."

B. Jason Brooks of the Foundation for Education Reform & Accountability said the report focuses attention on the state's entire education system and shows a need to better prepare New Yorkers for college.

He said the commission also included several accountability measures that should improve performance in colleges.

Several measures are aimed at providing more autonomy to SUNY campuses, especially the university research centers in Buffalo, Binghamton, Albany Stony Brook.

"What I see here is a promising architecture," said Carl Hayden, the former schools chancellor chosen this year by Spitzer to be chairman of the SUNY Board of Trustees.

"It is an opportunity you can be sure we will seize."

The recommendations will now go to Spitzer, who said he will include many of them in his state of the state speech and executive budget proposal in January.

He said this "bold, comprehensive and necessary" plan differs from previous higher education initiatives by governors George Pataki and Mario Cuomo.

"There is both an economic and a societal imperative," Spitzer said.

"I think we are in a different stage than we were 15 or 20 years ago."

"We see the out-migration of jobs, and we are reacting."

Assemblywoman Deborah Glick said her chamber will hold hearings on the recommendations before taking action.

She supported the call for more funds for SUNY and CUNY, but said she opposes the ideas of different tuition at different campuses and regular tuition increases.

The university worker unions and SUNY and CUNY officials supported the recommendations.

"Board prepares to take over NY horse racing"

By MICHAEL GORMLEY, Associated Press

Last updated: 5:22 p.m., Monday, December 17, 2007

ALBANY -- A board appointed by former Gov. George Pataki is preparing to take over New York's thoroughbred racing on Jan. 1 if closed-door negotiations between Gov. Eliot Spitzer and legislative leaders drag on past a Dec. 31 deadline.

The Non-Profit Racing Association Oversight Board authorized its chairwoman Monday to start negotiating to continue racing at Aqueduct in January, followed potentially by the Belmont and Saratoga race tracks.

If NYRA can't or won't continue to run racing after its franchise expires at the end of the year, then board Chairwoman Carole Stone is authorized to negotiate with others, including NYRA's competitors.

They are Capital Play, Empire Racing, and Excelsior Racing.

The interim agreement would stay in place until Spitzer and the Legislature agree on a new operator of the tracks for as long as the next 30 years.

Spitzer and NYRA already have a formal proposal to do that as part of a deal that includes NYRA relinquishing a claim it owns the race tracks.

Senate Majority Leader Joseph Bruno welcomed the board's action, but called for immediate public negotiations to resolve the issue and avoid uncertainty in an industry that employs 40,000 people statewide.

"What's more time sensitive than this?" Bruno said.

"I'm here and I've been here."

"It puzzles me why the governor is fiddling."

"I think he's reading too much about Nero."

Bruno would support having NYRA run the tracks, but he wants to award some lucrative pieces -- including selling the simulcast images of races and running video slot machines -- to other groups.

Spitzer and Bruno also disagree on how to reconstitute NYRA's board, which has been in place despite years of state and federal investigations into mismanagement and a pending bankruptcy court case.

State officials, including Spitzer, contend that the state owns the track and NYRA ceases to exist as a legal entity on Jan. 1.

But forcing the issue could mean a court would decide NYRA owns the property -- worth more than $1 billion -- on which it's run racing and paid taxes since 1955.

NYRA says it will seek to enforce its ownership claim if its franchise isn't continued.

NYRA isn't taking up an offer for what amounts to an extension, saying it is confident Spitzer and the Legislature will agree to awarding the franchise now.

NYRA President Charles Hayward told the industry magazine, Blood-Horse, on Saturday that NYRA had several conditions for any temporary arrangement.

Chief among them was to make sure any interim management deal wouldn't threaten NYRA's land claim.

"NYRA's attorneys are reviewing the resolution adopted today by the Non-Profit Racing Oversight Board to determine an appropriate course of action," NYRA said in a prepared statement Monday.

Stone, the oversight board chairwoman, is the former budget director in Pataki's Republican administration.

Spitzer, a Democrat, said negotiations with legislative leaders continue and could lead to awarding a franchise by Dec. 31.

But he said there are other ways to make sure New York racing would continue even without an agreement by the deadline.

"Spitzer confirms new subpoena, won't discuss details"

Associated Press

Last updated: 3:02 p.m., Monday, December 17, 2007

ALBANY -- Gov. Eliot Spitzer confirmed Monday his administration has received another subpoena from the Albany County district attorney, but refused to say what the prosecutor is seeking.

"That, you'll have to ask them," Spitzer said of the office of District Attorney P. David Soares.

"I have answered all these questions at length and we are cooperating fully."

Soares, however, has refused to comment on the investigation into events surrounding two Spitzer aides accused of misusing state police to compile Senate Republican leader Joseph Bruno's travel records.

Bruno called their actions political espionage.

Spitzer, who answered reporters' questions as he left a news conference, didn't respond when asked if he would instruct his attorneys to publicly release information about what the subpoena covers.

Spitzer acknowledged that when he was a prosecutor, he wouldn't release information about subpoenas.

The state Public Integrity Commission continues to investigate the case and how it was handled within the administration.

Republicans have claimed that responsibility for the plot went higher than the two aides initially blamed.

The issue has since gridlocked Albany, with Spitzer and Bruno not speaking about state issues for months at a time, according to Bruno.

The subpoena was first reported Monday by the New York Daily News.

In September, Soares found no crime in the case and said there was no evidence of a plot behind gathering data about Bruno's use of state resources on trips that mixed meetings with lobbyists and political activities.

In July, Attorney General Andrew Cuomo issued a report that no crime was committed, but the aides acted improperly in a plan intended to discredit Bruno.

But since Soares' initial findings, questions have been raised about the testimony of witnesses to his investigators and others probing the incident.

"Mental health providers overbilled taxpayers $1.3 million"

Associated Press

Last updated: 12:53 p.m., Monday, December 17, 2007

ALBANY -- New York Comptroller Thomas DiNapoli says he found some psychiatrists and other medical providers overcharged the state by more than $1.3 million for treatments.

In one case, a psychiatrist billed Medicaid eight times for more than 24 hours of treatment on given days and appears to have billed the government health care program for treatment he never provided, according to DiNapoli.

Those charges cost Medicaid $436,000.

The audit released Monday says the state could have avoided the overpayments with additional fiscal controls in the claims process.

The payments were made from August 1999 through October 2006.

The Health Department has made changes as a result of the audit.

"N.Y. farms said facing economic hardship"

By WILLIAM KATES, Associated Press

Last updated: 3:32 a.m., Wednesday, December 19, 2007

ITHACA, N.Y. -- Congress' failure to ensure that there are enough migrant workers in the nation's labor force could eventually cost New York agriculture hundreds of millions of dollars in lost crops and hundreds of thousands of acres in lost farmland, analysts say.

"Our country is reaping what Congress has sown," said Craig Regelbrugge, a vice president of the American Nursery and Landscape Association and co-chairman of the Agriculture Coalition for Immigration Reform, a national coalition of more than 300 agricultural producer associations.

The federal government's failure to deal with immigration reform -- particularly ensuring there are enough legal migrant farm workers for agricultural states like New York -- "constitutes nothing short of a national emergency," Regelbrugge said Tuesday during an agribusiness conference at Cornell University.

The annual conference also took up other farm issues -- soaring fuel costs, collapsed housing prices and the impact of biofuel on livestock feed costs.

But access to migrant labor is critical for agriculture, which differs from other economic sectors in that most farm work is seasonal.

In the 1990s, the American economy created more jobs than it had domestic workers, leaving agriculture even more reliant on an illegal labor force.

Nationwide, there are about 1.6 million full-time farm workers, said Regelbrugge.

About 80 percent of those workers are foreign born -- and nearly seven out of ten are working illegally, he said.

Despite repeated attempts, Congress and the Bush administration have been unable to come up with a long-term strategy on immigration reform and the current temporary worker program is "hobbled by bureaucracy, excessive and burdensome paperwork and restrictive wages," Regelbrugge said.

"The situation in agriculture is bad and deteriorating and agriculture needs relief," he said.

Data collected by the Farm Credit Association of New York indicates that failing to develop a functional immigration worker program could cripple operations on over 800 New York farms and put sales of approximately $700 million of agricultural products at risk, said Regelbrugge.

Without enough workers, as much as 750,000 acres of farmland could be converted to less labor-intensive -- and less profitable -- crops, while as many as 16,000 jobs that depend on the farm sector could be lost, he said.

The U.S. Department of Agriculture reported there were approximately 35,000 farms in New York in 2006, down about 600 from 2005.

Those farms produced roughly $3.7 billion in products on about 7.5 million acres.

Reports from around the state indicated that labor supplies were sufficient this year, said Thomas Maloney, a senior extension associate in applied economics at Cornell who studies agriculture-immigration issues in New York.

Maloney said he knew of no reports of measurable economic losses due to labor shortages.

But he said surveys showed the lack of reform has led to anxiety among growers, who worry that they will not have enough workers for future harvests.

"As a result of immigration enforcement activities, New York's farm managers are beginning to make choices they would not otherwise make," Maloney said.

Such choices include holding off expansion plans, exploring alternative labor pools, and switching to less labor-intensive crops.

Maloney said Cornell researchers are trying to come up with an exact number of unauthorized immigrant farm workers in New York.

In a survey last year of 105 Hispanic dairy farm workers, Maloney found nearly two-thirds were in the U.S. illegally.

If the federal government cannot resolve the larger issue of immigration reform, it should at least come up with a separate worker program for agriculture, Maloney and Regelbrugge said.

"Court: Agencies must prove privacy exemptions in info requests"

By VALERIE BAUMAN, Associated Press

Last updated: 4:22 p.m., Tuesday, December 18, 2007

ALBANY -- A government agency trying to withhold information from the public on privacy grounds has the burden of proving release of the records would create an "unwarranted invasion of personal privacy," the state's highest court ruled Tuesday.

The Court of Appeals decision came in the case of Data Tree LLC, a commercial online provider of public land records that sought a huge volume of data from the Suffolk County Clerk through a Freedom of Information Law request in 2004.

The court reversed a prior Appellate Division decision supporting the clerk's refusal to turn over the records because of privacy concerns and the sheer difficulty of producing the records in the form requested by Data Tree.

The case will be sent back to the trial-level Supreme Court for reconsideration.

In one part of its ruling, the high court struck down the Appellate Division's decision that it was up to Data Tree to prove disclosing the information would not run afoul of the FOIL's privacy exemption and said that's the responsibility of the clerk's office.

Data Tree had asked for electronic images of various public land records dating back to 1983.

After the county clerk did not respond to the request within the law's required five-day period, the company appealed to the county attorney, who rejected the request.

The county argued that complying would require rewriting and reformatting the data and constitute an unwarranted invasion of privacy.

It also noted the commercial nature of Data Tree's business and said the information requested was available for copying or downloading from computer terminals at the clerk's office.

The Court of Appeals decided that the FOIL has a fundamental "presumption of access to the records, and an agency (in this case the clerk) carries the burden of demonstrating that the exemption applies to the FOIL request."

The court also ruled that Data Tree's commercial motive for seeking the records was an irrelevant and improper basis for the courts to deny the request.

Officials in the Suffolk County Clerk's office said they are reviewing the decision.

Data Tree officials said they could not comment on pending litigation.

"Fed report shows slow job growth upstate"

By MICHAEL HILL, Associated Press

Last updated: 1:33 p.m., Tuesday, December 18, 2007

ALBANY -- Upstate New York is gaining jobs in financial services, education and health care, though overall growth is slow due to losses in manufacturing and other sectors, according to a Federal Reserve study released Tuesday.

A study of private-sector employment trends since 2000 by the Buffalo Branch of the Federal Reserve Bank of New York found the upstate area rebounding since 2004 -- but at a more modest rate than the nation or downstate.

The report also provides fresh evidence that upstate New York is continuing its decades-long change from an area heavily dependent on factory jobs to one reliant on service industries.

About 40 percent of employment upstate is in financial services, business and professional services, education, health care, leisure and hospitality.

Those sectors fueled job growth despite losses in the manufacturing, information, trade, transportation and utilities sectors, according to the report.

"The upstate New York economy has been undergoing significant restructuring," the report said.

The report said that while the number of private-sector jobs began declining in 2000, following a national trend, upstate rebounded with a modest 1.2 percent growth rate from 2003 to 2006.

Slow growth was expected to continue this year and beyond.

The report defined upstate New York as the 49 counties north of Orange and Dutchess in the Hudson Valley and noted that job growth has been uneven over the broad area.

Albany, Glens Falls and Ithaca have added jobs throughout the decade, while employment growth in Binghamton, Buffalo, Rochester and Syracuse metropolitan areas were "weighed down" by manufacturing losses.

Still, even those areas saw a modest rebound this year.

----

On the Net:

http://www.newyorkfed.org/research/regiona...lance2--07.html

"Fiber-optic network files for Chapter 11 - ION provides high-speed Internet access to rural customers in Albany and Greene counties"

By LARRY RULISON, Business writer, Albany, New York Times Union

First published: Tuesday, December 18, 2007

ALBANY -- An Albany-based fiber-optic network owned by 15 rural telephone companies has filed for Chapter 11 bankruptcy protection.

The network, known as the Independent Optical Network, or ION, filed its bankruptcy petition on Friday in U.S. Bankruptcy Court in Albany.

The document shows that the company has $7.9 million in assets and $10.3 million in debts.

ION was formed in 2004 to allow rural telephone companies to offer their customers high-speed Internet and telecommunications services over a fiber-optic network that otherwise would have been too expensive for any of them to build on their own.

One of those companies is State Telephone Co. in Coxsackie, which uses ION to offer Internet services to its 9,000 customers in Albany and Greene counties.

Mark Evans, an assistant vice president with State Telephone, said Monday that ION's Chapter 11 filing will not have an immediate impact on his company's Internet offering since state regulators require a continuation of service.

However, depending on what happens to ION's infrastructure -- a sale might be one possibility -- he said State Telephone may have to find another carrier for the television and Internet phone service it had planned to run over the network.

"We're going to find an alternative to that," Evans said.

An affidavit filed as part of the case by James Becker, ION's chief executive officer, said Cavalier Telephone Co. of Richmond, Va., which leases the network to ION, was expected to terminate service to ION on Monday.

It did not say why.

The affidavit also said ION employs seven people.

Officials from ION could not be reached for comment.

Attorney Richard Weisz, who is handling the bankruptcy case, could not be reached either.

Cavalier officials did not return a call seeking comment.

The ION Web site says its network contains 2,200 miles of fiber from Buffalo to New York City and from Syracuse to the Canadian border.

The bankruptcy petition states that Rural Telephone Finance Cooperative, a nonprofit in Herndon, Va., is the largest secured creditor of ION, with a claim of nearly $8 million.

"Adult homes owner facing foreclosure - 3 facilities run by Woodcock Estates hurt by high energy costs"

By ALAN WECHSLER, Business writer, Albany, New York Times Union

First published: Wednesday, December 19, 2007

CAMBRIDGE -- After running adult guest homes for nearly half a century, the Woodcock family took a chance last year and added the former Mary McClellan Hospital nursing home to its portfolio.

That move was their undoing.

Woodcock Estates Inc., owner of Cambridge Guest Home for Adults and Schuyler Guest Home for Adults in Schuylerville, now faces foreclosure on all three properties brought on by high energy costs and other expenses for the new business.

In February 2006, the Woodcocks said they were acquiring the McClellan hospital and adjacent nursing home, which had been closed since 2003.

The plan was to turn the nursing home into an adult home, like the other two, and eventually turn the hospital into a 65-unit apartment complex for seniors.

But nearly two years later, all three operations are in jeopardy after expenses rose suddenly.

And last month owner Isabell Woodcock suffered an even bigger hit when her husband and business partner, Allyn Sr., died after an illness.

He was 77 years old.

"Yes, we've had a bad time," Isabell Woodcock, 74, said Tuesday.

"But it's all being straightened out."

"We're working at it."

Guest homes provide assistance to infirm adults, but not at the level of a nursing home or an assisted-living community.

Gerald Fitzgerald, a mortgage officer at Community Preservation Corp., said the Woodcocks borrowed about $2.5 million two years ago.

Due to missed payments, that sum is now up to $3.4 million, he said.

The group filed for default last summer, and Woodcock Estates now is 15 months behind, he said.

Preservation Corp. is a nonprofit organization that provides money to benefit entities that service people with "special needs."

Fitzgerald works out of the corporation's Albany office.

"We'd like very much to keep this alive," he said of the homes.

"These are economic engines for these two communities."

The three adult homes have 99 residents and 60 employees.

Woodcock said her company had been hit hard by rising heating oil and electricity prices, but was also suffering from state reimbursement rates that did not cover residents' costs.

Some residents' relatives also stopped paying their bills, she said, adding to the financial pain.

While Woodcock said she has no intention of closing the homes, she is ready to sell the business.

"I'm going to throw in the towel," she said.

Fitzgerald said the group had already been approached by interested buyers.

"Many people are very interested in seeing this continue," he said.

Alan Wechsler can be reached at 454-5469 or by e-mail at awechsler@timesunion.com.

"Bruno quits consulting job for company with union ties"

By MICHAEL GORMLEY, Associated Press

Last updated: 4:02 p.m., Friday, December 21, 2007

ALBANY -- New York Senate Majority Leader Joseph Bruno said he has resigned from his job with a consulting firm that led to criticism from good-government groups amid an FBI investigation into his private business dealings.

The Rensselaer County Republican said Friday he and Wright Investors' Service agreed to end their relationship Monday.

The Milford, Conn., company manages major financial funds for some of the state's politically powerful unions which often have proposals before the Legislature.

Bruno said he was ending the part-time job that had become a distraction.

"I have done so because the focus on my outside interests has taken attention away from more pressing issues such as our efforts to address the critical needs of our State going forward," Bruno said in a written statement released Friday.

"There has been a great deal of discussion regarding the ability of part-time legislators to pursue outside interests."

"I look forward to the continuing debate over that idea and whether it makes sense to have a full-time legislature or part-time legislators who are allowed to have outside income."

Bruno has refused to say what his role was, how much he was paid or which clients he dealt with.

His spokesman, John McArdle, continued to refuse to detail the private consulting role on Friday.

"Sen. Bruno has complied completely and fully with all state disclosure requirements regarding any non-legislative business he and other legislators are allowed to engage in, and that includes the work he did for Wright Investment Services," McArdle said.

In New York, lawmakers are considered part-time and allowed to hold other jobs.

Most of those jobs are with law firms, and lawmakers -- including Democratic Assembly Speaker Sheldon Silver -- don't divulge their clients, saying it would violate attorney-client privilege.

There was no immediate comment from Silver or Spitzer.

A Wright Investors' spokesman wouldn't answer questions about Bruno's role with the company over the last 10 years.

"Given the current environment, in which such employment is often viewed in a negative light, it is likely that questions will continue to be raised about Mr. Bruno's employment," the company said in a prepared response.

"Accordingly, Wright Investors' Service and Mr. Bruno agreed that the best course of action for both parties was to end our relationship, effective December 17, 2007."

"We believe that Mr. Bruno's work for the firm has always been conducted according to established legal and ethical principles of our business," the written statement concluded.

Bruno's annual ethics reports disclosed the employment, though not what he does there.

The state ethics law allows officials to have outside employment, though they cannot engage in activities that create or appear to create a conflict with their public duties, and they are barred from obtaining unwarranted privileges for themselves or others.

Eugene Helm, president of Wright Investors, told The New York Times that the company's relationship with unions predated Bruno's employment, which he described as "business development".

He wouldn't disclose details.

Some of Bruno's outside business interests have been the subject of a federal investigation for more than a year, but Helm said earlier this month that his company has "never run afoul of the law or had a suit against us."

Officials from several unions that have pension or health funds managed by Wright said they didn't know Bruno worked there.

Government watchdog groups said that the situation highlights the weakness of ethics and disclosure laws in New York.

"Jobless rate climbs in Capital Region - Cuts in manufacturing, wholesale trade push level to 3.8 percent"

By ERIC ANDERSON, Deputy business editor, Albany, New York Times Union

First published: Friday, December 21, 2007

ALBANY -- Job losses in manufacturing and wholesale trade helped push unemployment in the Capital Region to 3.8 percent of the work force in November, from 3.5 percent a year earlier, the state Labor Department reported Thursday.

Manufacturing shed 1,100 jobs, while wholesale trade lost 1,000.

Although companies that cut jobs were not identified, two local manufacturers, Owens Corning and Albany International Corp., shed hundreds of jobs during the past year.

"Manufacturing losses have accelerated over the past couple of months," said state labor markets analyst James Ross.

But he said other companies, notably General Electric Co., have announced plans to hire workers.

GE Energy is expanding at its plant in Schenectady, while GE Healthcare is building a new plant at Rensselaer Technology Park in North Greenbush.

Ross expects additional job declines in December, due to the relatively mild weather last year that buoyed employment in construction and leisure/hospitality.

With this year's colder, snowier weather, employment likely will be depressed.

"I don't think it's a long-term situation," Ross said of the recent labor market weakness.

"We still hear businesses clamoring for workers."

"Labor supply issues are holding down employment in many industries."

Indeed, that was the finding of a separate survey by Fort Lauderdale, Fla.-based Spherion Corp., a recruiting and staffing company, which reported that its New York Employee Confidence Index increased 0.8 points to 53.6 in November.

Any reading above 50 indicates a positive confidence level.

Spherion's national index, meanwhile, fell 3.5 points to 52.9 in November, its lowest point so far this year.

November's increase in Capital Region unemployment "is part of the seasonal effect we normally see this time of year," said Tim O'Brien, a Spherion managing director based in upstate New York.

"If people felt like there's uncertainty in the job market, the natural reaction would be to hunker down and wait for the bad times to pass."

But, he said, the state survey found an increase in the number of people who plan to look for new jobs next year, to 4 in 10 in the November, compared to just over 3 in 10 in October.

The number of respondents confident in their ability to find a new job, 55 percent, was down slightly from 57 percent in October.

O'Brien said his own permanent-placement business has surged, up 500 percent this month from a year ago.

Spherion focuses on filling positions in information technology, accounting and finance, and engineering.

In the Capital Region metropolitan area, unemployment was lowest in Saratoga County, at 3.5 percent, followed by Albany County, at 3.7 percent, and Rensselaer and Schenectady counties, at 3.9 percent.

Schoharie County's 4.6 percent was the highest in the region.

Anderson can be reached at 454-5323 or by e-mail at eanderson@timesunion.com.

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

ELIOT SPITZER ON GOVERNMENT REFORM TO THE ROCKEFELLER INSTITUTE OF GOVERNMENT, November 21, 2005:

I'm proud of the fact that my office has achieved a great deal during the last seven years in reforming Wall Street and the financial sector.

THAT WAS POSSIBLE IN PART BECAUSE I KNEW WHOSE SIDE I WAS ON.

I DIDN'T WAIVER.

I didn't worry about the pushback that inevitably comes when you try to change the status quo.

I believe that what happened on Wall Street and in these various other areas can also happen on State Street here in Albany.

My starting point is this proposition: you can't achieve reform - you can't achieve meaningful, far-reaching reform - unless it is based on core values.

In the financial sector we argued core values that no one could dispute: honest, full, free and fair competition.

OUR GOAL WAS AND IS TO MAKE THE FRE ENTERPRISE SYSTEM WORK AS IT SHOULD - THROUGH TRUTHFUL, FULL DISCLOSURE AND THE CREATION OF A LEVEL PLAYING FIELD.

To be sure, there were those who asserted that our actions would harm the markets.

The people who did that were protectors of the status quo.

THEY DID NOT UNDERSTAND THAT THERE ARE MOMENTS WHEN GOVERNMENT MUST ACT TO HELP RESTORE THE INTEGRITY OF THE MARKETS.

They did not understand that enforcement of the rules is good for business, and that such action helps unleash the true power of the system - with capital flowing freely to the greatest opportunities for growth.

On Wall Street and throughout the financial sector, the status quo was a system based too frequently on cronyism.

It was a system in which a favored few special interests took advantage, BY FRAUD, of the rest of us.

It was a system where one senior participant, without any sense of irony, observed that what often was a conflict of interest was now a synergy.

The reality, though, was that they were robbing people of pensions and nest eggs.

And their actions distorted and harmed the markets.

We stepped forward and stopped the fraud we found, returned money to people, and restored competition.

THIS WAS GOOD FOR THE MARKETS AND GOOD FOR THE ECONOMY OVERALL.

IN FACT, CONTRARY TO THE PREDICTIONS OF THE NAYSAYERS, THE INDUSTRIES WE INVESTIGATED AND THEN REFORMED ARE STRONGER NOW THAN THEY WERE BEFORE.

That even goes for the individual companies that we investigated.

They may not have liked the process, but they were made stronger as a result.

IN THE END, WE ACHIEVED RESULTS WHERE OTHERS HAD FAILED AND GIVEN UP, AND WHERE NO ONE THOUGHT IT WAS POSSIBLE.

WE HAVE DONE IT TIME AND TIME AGAIN - INVESTMENT BANKS, MUTUAL FUNDS, PHARMACEUTICAL COMPANIES, INSURANCE COMPANIES AND ELSEWHERE.

In Albany - as it was on Wall Street - the status quo is a system that lacks ACCOUNTABILITY.

IT IS A SYSTEM THAT IS CONTROLLED BY SPECIAL INTERESTS.

IT IS A SYSTEM THAT IS NOT EFFICIENT, IS NOT OPEN AND TRANSPARENT.

Posted by John Galt on December 22, 2007 5:46 PM

http://www.nydailynews.com/blogs/dailypoli...4.html#comments

NEWSWEEK

News December 19, 2007, 11:15PM EST

"The Bear Flu: How It Spread - A novel financing scheme used by Bear Stearns' hedge funds became a template for subprime disaster"

by David Henry and Matthew Goldstein

When the subprime mortgage market began to unravel late in 2006, global bond markets barely flinched.

But when two Bear Stearns (BSC) hedge funds collapsed in June, the event sparked a global credit crisis that has yet to ease.

New evidence sheds light on how those hedge funds—and their managers—became star players in the subprime bust, the biggest financial disaster in decades.

The revelations also show how other players in the mortgage market adopted the Bear funds' tactics, collectively building a financing structure with many of the hallmarks of a pyramid scheme.

The legal consequences are still unfolding.

In recent weeks securities regulators and federal prosecutors have stepped up their investigations into the two funds, probing the fuzzy math used to value the underlying assets, the aggressive sales pitches that portrayed the funds as safe, and frequent trades with other Bear-managed portfolios.

On Dec. 19, Barclays (BCS), which lent one Bear fund hundreds of millions, filed a lawsuit alleging fraud over misleading statements about the portfolio's health.

Says a Bear spokesman:

"We believe that any such lawsuit is unjustified and without merit."

Investigators also are asking why Ralph R. Cioffi, the funds' top manager, moved $2 million of his own $6 million investment in the hedge funds into another fund in early 2007 while simultaneously raising cash for the funds, trying to sell them to Cerberus Capital Management, and telling investors they couldn't redeem their shares until the end of June.

People familiar with the situation at Bear stress that Cioffi, who left the firm the week of Dec. 10, was simply investing in a different Bear fund with which he was involved.

Cioffi's lawyers did not return e-mails or calls seeking comment.

A CDO Called Klio

It's too soon to tell whether authorities will find any wrongdoing.

But a BusinessWeek analysis of confidential hedge fund reports and interviews with lawyers, investors, and securities experts reveals just how pivotal a role Cioffi's funds played in the mortgage market's dramatic rise, dizzying peak, and disastrous fall.

The analysis shows Cioffi and his team developed a novel investment product to attract money-market funds—a new class of investor—to the mortgage market.

Their innovation, a particularly aggressive form of collateralized debt obligation, or CDO, became the building blocks of the industry's push to keep growing for longer than it otherwise would have.

After the market turned, it became clear the Cioffi money machine contributed to much of the $10 billion-plus in writedowns that Citigroup © and Bank of America (BAC) revealed in November.

Fresh evidence also suggests Cioffi's team may have engaged in self-dealing by using the new CDOs to buy assets from the funds, artificially boosting returns.

Citi and Bank of America declined to comment.

At the center of it all was the new breed of CDO pioneered by Cioffi and his team to tap into the $2 trillion universe of money-market accounts in which individuals and corporations stash their spare cash.

Cioffi's CDOs, initially branded "Klio Funding," were entities that sold commercial paper and other short-term debt to buy higher-yielding, longer-term securities.

The Klios were a win-win proposition for money-market funds.

They paid a higher interest rate than the usual short-term debt.

And investors didn't need to worry about the risky assets the Klios owned because Citigroup had agreed to refund their initial stake plus interest, through what's known as a "liquidity put," if the market soured.

Cioffi engineered three such deals in 2004 and 2005, raising $10 billion in all.

What did Citigroup get for guaranteeing the Klios?

For one thing, fees.

The Klios were also a ready buyer of Citi's own stash of mortgage-backed securities and other debt.

Citi probably never imagined it would have to make good on those guarantees because the underlying assets had the highest credit ratings.

Cioffi used the money from each deal to purchase billions in mortgage-backed securities and pieces of other CDOs for his three Klios.

He bought many of the assets directly from the two Bear hedge funds he managed.

The move also supplied the hedge funds with cash.

A Pyramid Structure

The Klios had another powerful feature: They allowed the Bear funds to lock in longer-term financing.

Typically, hedge funds borrow for short periods of time, usually just days or weeks.

Under the terms of the Klio deals, Cioffi could use the money for at least a year without having to worry that it would disappear overnight if the market got volatile.

He discussed that advantage in an Apr. 25 call with hedge fund investors, boasting that the funding wasn't subject to market fluctuations.

The Klio structure spread rapidly as other hedge funds, CDO managers, and banks, including Barclays, Bank of America, and Société Générale, followed Cioffi's lead.

From 2004 through 2007, Wall Street raised some $100 billion through these innovative CDOs, essentially creating a whole new way for the industry to finance risky subprime loans.

That success, in turn, inspired copycat products such as structured investment vehicles, which also sold short-term debt.

At their peak, in February, 2007, SIV assets hit $300 billion.

Barclays declined to comment, but the company announced on Nov. 15 losses from CDO investments that it had been forced to take on its books.

A Société Générale spokesman said it has transferred all of its risk to a large, global financial institution.

In hindsight, CDOs and SIVs served as a foundation for a pyramid-like structure that Yale University economist Robert J. Shiller says occasionally arises from bull markets.

As new investors arrive to the party, they bid up prices, boosting returns for those who got in earlier.

The big gains attract more investors, and the cycle continues—as long as the players don't try to take out their money en masse.

The mortgage-market system played out much the same way.

The new type of CDO lured a different tier of investors: money-market funds.

The flood of fresh money made it even cheaper and easier for buyers to get mortgages.

That, in turn, drove up home prices, holding off defaults and foreclosures.

The process enriched the people who bought earlier in the boom and triggered more speculation.

"An Incestuous Relationship"

The complexity of the Klios and their ilk only encouraged lax lending practices by putting too much distance between the borrowers and the ultimate holders of their debt.

Since the Klios offered a refund policy, money-market managers didn't have to worry about whether home buyers would pay back their loans.

Their investments were protected even if the owners eventually defaulted on their mortgages.

Indeed, as the bubble inflated, there was little incentive for the array of middlemen collecting fees—mortgage brokers, real estate appraisers, bankers, money managers, and others—to do the proper checks.

The lack of oversight likely contributed to the rampant fraud on some underlying loans, says S. Kenneth Leech, chief investment officer of bond-investing firm Western Asset Management.

"Nobody wanted to take the punch bowl away from the party," adds Charles Calomiris, a professor at Columbia Business School.

"They were all making fees."

Now investigators are trying to determine whether Cioffi and his team crossed legal lines.

The Klios provided the Bear hedge funds with a ready, in-house trading partner.

Their financial reports, which were reviewed by BusinessWeek, show many months in which the Cioffi-managed Klios traded only with the Cioffi-managed Bear funds.

For example, in April, 2006, one Klio CDO bought $114 million worth of securities from one of the Bear funds.

Such trades, says Steven B. Caruso, an attorney who represents several Bear hedge fund investors, may be "indicative of an incestuous, self-serving relationship that appears to have been designed to establish a false marketplace."

If that's why the trades were made, the maneuvers could have falsely boosted the hedge funds' returns—and the fees Cioffi and his team collected.

In an e-mail to Cioffi and co-manager Matthew Tannin cited in a legal filing, Raymond McGarrigal, another executive at the Bear funds, gushed about the Klio setup, writing that "one of the great things we've done is allow the Klio to buy assets from the hedge fund."

Lawyers for Tannin and McGarrigal declined to comment.

The End of an Era?

Amid the market turmoil earlier this spring, Cioffi hoped the Klios would work their magic once again.

In April, as losses at the funds began mounting, Cioffi set up another CDO, High Grade Structured Credit CDO 2007-1, which issued short-term paper and offered investors a money-back guarantee from Bank of America.

Cioffi had raised nearly $4 billion by late May, making it the biggest CDO of the year, according to Thomson Financial (TOC).

Just as before, Cioffi used the money to buy assets from the hedge funds, perhaps to prop up the portfolios, which by then were on the brink of collapse.

In an April conference call with the hedge funds' investors, Cioffi said the new CDO was part of his plan "to get the funds back on track to generate positive returns."

It didn't work.

Just weeks after the deal for the CDO closed, the Bear funds imploded, wiping out $1.6 billion of investors' money.

(The fund into which Cioffi moved $2 million, Bear Stearns Structured Risk Partners, was up 6.5% as of Nov. 30.)

By autumn the practice of using CDOs to raise cash was dead.

Money-market funds had stopped buying the short-term debt, and the credit markets were frozen.

That forced Citigroup and Bank of America to make good on their guarantees to investors in Cioffi's CDOs, triggering big losses at the two banks.

The global markets are dealing with the consequences: The tab from the mortgage mess could run up to $500 billion, and central bankers are struggling to stave off recession.

As investigators sort through the wreckage, the records of Bear Stearns' doomed hedge funds are turning out to be some of the most revealing in an era of financial folly.

Henry is a senior writer at BusinessWeek. Goldstein is an associate editor at BusinessWeek, covering hedge funds and finance.

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

Posted by IronMike: Hey John.

Obviously, it's therapeutic for you to continue to tell the story about how in your view Eliot Spitzer personally engineered the persecution of Paul Plante.

JOHN GALT RESPONDS: Mike, dude, you are so totally missing the points that I am making in here ...

Eliot Spitzer did not personally "engineer the persecution" of the engineer, Paul R. Plante ...

He legitimized it as NYS Attorney General ...

And he protected it ....

Instead of enforcing the law ...

And yes, Mike, you are correct ...

Part of that sorry story has already been told in here ...

And I am avoiding going over it again and again and again, except as necessary as background ...

The issue right now, as you yourself brought up in here so long ago, is the HOUSING MARKET MELTDOWN that is going to have disastrous consequences for us older folks living, or trying to live, on fixed incomes on our own property in upstate NY where we also have to pay ever-increasing property taxes to grasping local governments, bloated school districts, and corrupt county governments ...

The Buckadelic dude has attributed that MELTDOWN to HEDGE FUNDS ...

I don't think it is that simple ...

I think the loss in value is in part related directly to the lack of intrinsic or underlying value in the physical properties themselves that were mortgaged for far more than they would ever be realistically worth ...

And BUT FOR bogus approvals by local planning boards, the county health departments in NYS and the state Health Department, and bogus certifications by local building inspectors ...

These properties wouldn't have been on the market to be mortgaged in the first place ...

And so ...

That is how Paul Plante fits in, Mike ...

The Paul Plante matter firmly ties Eliot Spitzer into the LAND SCAM SCHEME here in NYS that I believe underlies the HOUSING MELTDOWN to the extent that it is happening here in NYS ....

And so ...

THE ISSUE IS THE HOUSING MARKET MELTDOWN, dude ...

That is the page that we are on in here, now ....

I do hope you stick around ....

But since we are virtual in here, of course, I can't make you do that ....

Other than by making the subject matter interesting enough that you will follow it along ...

Especially as it does concern the Public Health Law and POLICE POWER of the "state" here in NYS ...

Which I believe is a matter of some interest to you professionally ...

And so ...

Posted by John Galt on December 22, 2007 2:37 PM

http://www.nydailynews.com/blogs/dailypoli...d-ends-154.html

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

Posted by IronMike: Hey John.

Obviously, it's therapeutic for you to continue to tell the story about how in your view Eliot Spitzer personally engineered the persecution of Paul Plante.

It truly baffles me what possible interest he, a Democrat, would have in doing the bidding of the corrupt Republican machine in Rensselaer County.

Maybe there was a business connection.

JOHN GALT CONSIDERS THIS: Mike, dude, what would be really therapeutic for me as an older disabled person in upstate NY on a low fixed income would be to have a truthful, trustworthy person in there as NYS governor ...

A governor who was in there tending to the business of the State of New York, ACCORDING TO ITS WRITTEN LAWS AND CONSTITUTION ...

So that us older common folks out here in APPALACHIA could live our lives in some degree of comfort and safety ....

Neither of which we have presently here in NYS ...

And so ....

As to Spitzer's involvement in the Pul Plante affair, Mike, keep in mind that the alleged perp, William "BUCK" Shea, who is not Buckadelic, was an employee of the REPUBLICAN administration of George Pataki, not Rensselaer County ...

Shea was a NYS employee who was used as a conduit to get the fraudulent Mental Health incarceration order from the Samaritan Hospital in Troy to the NYSP, the VA Police at Stratton VA Hospital in Albany, and the office of the US Attorney for the Northern District of NY in Albany ...

And Shea also made false statements to the federal VA Police as a NYS employee ...

Shea was Spitzer's client ....

WHY, Mike?

And for that answer, I would go back to Spitzer's own words above in the Paumgarten article, where he states that young Andy Cuomo is his lawyer ...

Using that same logic presented to us through Nick Paumgarten by Spitzer himself ...

We can assume that Spitzer was Pataki's lawyer at the time that NYS employee William "BUCK" Shea was used in the Paul Plante affair in August of 2001 and thereafter ...

So Spitzer's involvement was at the state level, Mike ...

Spitzer wasn't doing the bidding of corrupt Rensselaer County officials ...

He was protecting them ...

And in the process of doing so, he was also protecting Northeast Health, which is a member of the NYS Business Council ...

And to do that, Spitzer was teamed up with "Donnie Bob" Ford of the powerful Albany law firm of Thuillez, Ford & Gold Johnson ...

Which powerful politically-connected law firm is also a member of the NYS Business Council ...

AND connected back to Eliot Spitzer through the TOBACCO LAWSUIT SETTLEMENTS ...

Where thanks to Eliot Spitzer as state AG ...

The GOLD JOHNSONS were awarded legal fees of something like $13,000 per hour ...

And so ...

Posted by John Galt on December 22, 2007 3:33 PM

http://www.nydailynews.com/blogs/dailypoli...d-ends-154.html

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

Did you see Platoon, Mike?

That one scene in there where the one sargeant says something about "the way things are supposed to be, and the way that they are"?

That really is what the Buckadelic dude, and myself and yourself and topo and Dr. Cannon and everyone else in here is kind of talking about ....

THE WAY THINGS IN NYS GOVERNMENT ARE SUPPOSED TO BE ...

VERSUS THE WAY THINGS REALLY ARE ...

The STATUS QUO that Eliot Spitzer is very much a part of, despite his blather about "reform" ...

And to do that, Mike ....

To have this admittedly long-term discussion as citizens ...

We all need CONTEXT ...

That is why I periodically bring in the Paul Plante affair ...

For the context ...

Because there is no speculation there ....

That case is based on hundreds and hundreds of pages of OFFICIAL NYS records ...

Official records, such as that letter above here from Plante to the federal judge concerning tactical chicanery by Asst. AG Nelson Sheingold, who is now council to Spitzer's worthless IG, that firmly establish for us in here, not the way things are supposed to be ...

But the way that they really are ...

And they also firmly establish as factual evidence the roles that various players have played in this on-going drama that goes back in time, in actuality, to in or about 1978 ...

When some kind of political deal was allegedly done by the government of the State of NY and lawyers for powerful white collar criminals here in NYS ...

That would allow them to launder some $44 BILLION in illicit, ill-gotten gains back then to get that money back into circulation and to clean it up ....

Perhaps by laundering some of that money back through the State of NY itself as loans to clean it up ...

And so ...

Posted by John Galt on December 22, 2007 3:51 PM

http://www.nydailynews.com/blogs/dailypoli...d-ends-154.html

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

Posted by IronMike: I'll stay here because I like you all better.

But if the discussion goes around in circles, I'll split.

Enjoy your weekend and your holiday, my friend.

JOHN GALT RESPONDS: Well, Mike ...

The discussion has in fact gone full circle in here, one more time again, with this last post of mine above here ...

Eliot Spitzer promising his cronies in the NYS Business Council in September of 2006 that if they made him governor of the State of New York ...

That he would in turn GUT for them the regulations governing development here in NYS ....

He would insure that the NYS Business Council was handed a set of GUTTED REGULATIONS that regulate exactly nothing at all with respect to development ...

So that the members of the NYS Business Council could in turn market their developments here in NYS, insuring those who were buying in, and the mortgaging agencies, that their developments did on fact comply with all regulations ....

WHEN THE REGULATIONS WERE IN FACT EMPTY!

WHICH IS THE ESSENCE OF FRAUD, Mike ...

THE ESSENCE OF THE FRAUD THAT UNDERLIES THE HOUSING MELTDOWN ...

Because GUTTING the regulations as Spitzer was CHAMPION of, results in the marketing of SHODDY PRODUCTS to the unwitting members of the public who depend upon sound regulations to protect them from being FLEECED ...

And these unwitting members of the public do not realize that they have been taken for a ride until they own the SHODDY-BUILTS that Spitzer's GUTTED REGULATIONS are intended to provide for, to maximize the profits of his cronies in the NYS Business Council ....

And the chickens then come home to roost ...

FOR THEM ...

And whomever holds the mortgage on their SHODDY-BUILT ...

Thanks to Eliot Spitzer and his "GUMMINT REFORM" here in NYS on behalf of the NYS Business Council ...

And so ....

Enjoy the weekend yourself, Mike ...

And I will as well ...

And I'll tell you something, Mike ...

I am past being sick of this @#$% ...

The same old NY @#$% again and again and again, without end, to our financial detriment here in NYS ...

These lies ...

These untruths ...

These evasions ....

The corruption ...

Sick of it, Mike ....

And so ...

Posted by John Galt on December 22, 2007 6:25 PM

http://www.nydailynews.com/blogs/dailypoli...d-ends-154.html

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

John, thank you for the education.

You have made the connections quite clear for me and all other readers, and I honestly appreciate it.

My question assuming Eliot was a Democrat and not a DINO was rhetorical.

The whole affair was quite fishy, but you connected the dots perfectly.

You really should consider writing a long story describing all the facts and circumstances and connections in their intricacy and submit it to an alternative newspaper for publication.

I think it would have a good chance of getting published.

Posted by IronMike on December 23, 2007 9:24 AM

http://www.nydailynews.com/blogs/dailypoli...d-ends-154.html

"Critics take aim at mall owner - Investors question decisions at Feldman Mall Properties, which runs Colonie Center"

By ALAN WECHSLER, Business writer, Albany, New York Times Union

First published: Saturday, December 22, 2007

COLONIE -- It's the busiest shopping period of the year.

But for stockholders of Feldman Mall Properties Inc., this is not the season to be jolly.

Feldman Mall, the Long Island-based owner of Colonie Center, has seen its stock go from $12 last summer to a low of $2.41 in late November.

And on Friday afternoon, Chairman Larry Feldman paid for it, as investors and analysts hammered company officials with questions for nearly an hour during a conference call.

Questions ranged from concern about the company's use of a private jet earlier in the year to an internal audit estimating Feldman Mall's worth that the company declined to release.

(Feldman said it consisted of outdated 2006 numbers.)

Paul Rittmaster, an analyst at Oppenheimer & Co. Inc. in New York City, took the company to task for announcing a stock buyback program and then delaying it.

"You folks seem to be in disarray to me," he said.

Founded in 2004 to continue the business of an Arizona mall management company, FMP is a real estate investment trust based in Great Neck.

The company paid $84 million for Colonie Center in 2005, and since then has invested an additional $85 million there.

The mall recently unveiled new major retailers and restaurants.

It is also opening a multiplex theater, but the pushed-back start has been delayed again -- this time to spring of 2008.

Feldman, speaking after the conference call, said he wondered if some callers were looking to push down the value of the stock.

"Some of our stockholders are short-term holders, and this is a long-term development play," Feldman said.

"The people in Albany know that Colonie Center is at a turning point."

Feldman specializes in sprucing up underperforming malls and selling them once rents have risen.

During Friday's call, one investor criticized the company for renting a Lear jet to bring a half-dozen executives on a whirlwind tour of the company's seven malls, which are scattered around the country.

Feldman said the jet cost about $28,000 and was needed to ensure the group could visit the malls efficiently.

'I've traveled on private jets on occasion," said the investor, who identified himself as Robert Forte.

"But usually because I'm high-fiving a deal that made a lot of money, not during a period of lean times."

In response to the question about holding back on a stock repurchase plan, Feldman said it was upon a lawyer's recommendation to wait until the third-quarter earnings came out.

Also, for the second time in two quarters, Feldman was late in its quarterly earnings filing.

The company said it was outsourcing its "back office" to solve the problem.

"Our board views these delays as unacceptable," Feldman said.

"We are committed to getting timely filings back on track."

Feldman Mall Properties Inc. on Friday reported a bigger net loss for the third quarter ended Sept. 30 compared with a year ago: $3.1 million vs. $1.7 million.

For the nine months ended Sept. 30, the company recorded a net loss of $8.9 million, compared with net income of $21 million during the year-ago period.

The company blamed the quarterly loss on nonrecurring expenses and fees, some related to the exploration of ways to raise shareholder values.

The expenses are expected to impact the fourth quarter, too, Feldman said.

Wechsler can be reached at 454-5469 or by e-mail at awechsler@timesunion.com.

"Bank plans national job cuts - KeyCorp to shed 1,040 positions, but few losses expected in Capital Region"

By CHRIS CHURCHILL, Business writer, Albany, New York Times Union

First published: Friday, December 21, 2007

ALBANY -- KeyCorp said late Thursday it will eliminate 1,040 jobs nationwide, though few cuts are expected in the Capital Region.

Cleveland-based Key, with 40 branches in the area and almost a quarter of the region's deposits, has a regional headquarters in Albany.

Key spokeswoman Therese Myers said the announced cuts will have a "very minimal" impact on the bank's employment here.

"Most of the job cuts are in Cleveland and more are scattered among 28 states," she said.

The bank will not release a local job-cuts number, Myers said.

In a statement issued Thursday, the bank blamed the slumping housing market for the cuts, particularly in California and Florida.

Just last week, the bank said it intended to cut 415 jobs in 2008, about 2.2 percent of its 18,500 employees.

But Thursday's announcement dramatically increases the number of eliminated jobs.

Three hundred of the jobs are open positions, the bank said.

The Associated Press said Key expects to post a loss of up to 5 cents per share in the fourth quarter and to exit its home-improvement lending and payroll services businesses.

The bank exited the subprime-mortgage business more than a year ago, the AP said, quoting CEO Henry Meyer as saying the bank has "no meaningful" exposure to risky lending or investment vehicles related to the housing market.

In after-hours trading, KeyCorp shares slid 61 cents, or 2.8 percent, to $21.30, according to the AP.

The stock ended the regular session down 40 cents to $21.91.

"Spitzer to talk, but to what extent?"

Albany, New York Times Union

First published: Monday, December 17, 2007

]Gov. Eliot Spitzer will likely go before the state's Public Integrity Commission next month to talk about what he knows of the ongoing travel records scandal that has put his former aide Darren Dopp and other members of the governor's circle in the cross hairs of Albany County District Attorney David Soares, according to a person familiar with the investigation.

What's less clear, though, is precisely how much Spitzer will disclose about his meeting with the commission, the majority of whom are appointed by him.

There was some minor confusion last week amid news reports which did and then didn't indicate that the governor would release transcripts of his talks with the commission.

But it turns out that unless he is a target of an investigation by the commission, which he apparently is not, he can't get transcripts.

However, commission spokesman Walter Ayres explained that a witness before the commission can take notes and his or her lawyer can do the same, although no recording devices are allowed.

With that in mind, the overarching question for the governor might be whether he will fully discuss what he talks about before the commission -- transcript or not.

"I'm happy to have my comments released all the time, and answer every question."

"I always have," Spitzer said last week when asked by a reporter if he would discuss his talks with the commission.

Contributor: Capitol bureau reporter Rick Karlin. Got a tip? Call 454-5758 or e-mail rkarlin@timesunion.com.

"New life in Spitzer probe - District attorney again subpoenas governor's office seeking material in travel records scandal"

By RICK KARLIN and ROB GAVIN, Staff writers, Albany, New York Times Union

First published: Tuesday, December 18, 2007

ALBANY -- The travel records scandal that has enveloped Gov. Eliot Spitzer and some of his top staff members is far from over, as the governor on Monday confirmed that his office has received yet another subpoena from Albany County District Attorney David Soares.

This comes as Soares is hiring a chief for his Public Integrity Unit, which subpoenaed the governor; and as the state Public Integrity Commission is about to call Spitzer in to testify next month.

Spitzer briefly acknowledged the new subpoena during a news conference on Monday but wouldn't elaborate.

"Obviously, we are cooperating fully," he said.

However, the latest subpoena, first reported Monday in the New York Daily News, was said to be seeking phone records, messages on BlackBerry devices and e-mails among the governor's inner circle.

The Republican-controlled Senate Committee on Investigations and Government Operations also is seeking such material, although Spitzer as well as his former chief spokesman Darren Dopp are fighting that request in court.

Soares has been focusing on Dopp and whether there were contradictions between what Dopp told the district attorney in an unsworn interview and what he told the Public Integrity Commission and Attorney General Andrew Cuomo, who, like Soares, completed an inquiry on the affair earlier this year.

One of the questions centers on whether there are discrepancies between a notarized statement that Dopp gave the attorney general in which he admitted errors in judgment and what he told the Public Integrity Commission.

Whether those discrepancies amount to a criminal violation is ultimately up to a grand jury that will look at the matter, Soares said last week.

"We are in the infancy of our process, and the time will come and the day will come when all those questions are answered," Soares said.

He stressed that he has no set timetable for finishing his probe.

Statements like that could mean the travel records probe could be with the governor through the new year, even though he has repeatedly tried to move past it.

The scandal has dogged Spitzer since the summer, when Republican Senate Majority Leader Joseph L. Bruno charged the governor's aides with spying on him by having the State Police keep track of his travels when the Brunswick Republican went to New York City aboard a state helicopter.

Attorney General Andrew Cuomo in July concluded that no laws were broken but that Spitzer aides, including Dopp, improperly got police involved in a political affair by having them re-create from memory the senator's New York City itineraries.

In September, Soares issued his own report agreeing that the travel records affair included no illegalities, but concerns over inconsistencies prompted Soares to reopen the inquiry.

Heading the Public Integrity Unit is Bruce Lennard, who left the office this summer for a post at the Commission on Judicial Conduct, said Soares spokeswoman Heather Orth, who explained that he was rehired last week.

Orth said the hiring was not linked to the travel records affair, saying there was an open position to run the bureau for some time.

"We were just looking for the right person," she said.

Lennard will oversee a unit with three full-time staffers -- himself, Assistant District Attorney Linda Griggs and investigator Steve Stein -- and, at times, assistance from others in the office, Orth said.

Karlin can be reached at 454-5758 or by e-mail at rkarlin@timesunion.com.

"Dormitory Authority hunts missing ID tapes - Data on hundreds of current, former workers were lost in transit"

By RICK KARLIN, Capitol bureau, Albany, New York Times Union

First published: Thursday, December 20, 2007

ALBANY -- Data tapes containing Social Security numbers, phone numbers and addresses for up to 800 current and former employees of the state Dormitory Authority, many of whom live in the Capital Region, are missing.

Employees of the agency, which funds and oversees construction of college dorms and other capital projects, were informed of the missing tapes on Wednesday via an e-mail that also offered advice on how to learn about identity theft precautions.

"UPS is investigating it at their end."

"We are investigating it to the extent that we can on our end," said authority spokesman Marc Violette.

The agency, he explained, sends a package of the tapes, which are kept as backups, to the New York City office each evening.

They include time sheet information as well as records for some of the 3,000 vendors the agency deals with.

Employees at the authority's Penn Plaza office in Manhattan discovered the envelope was damaged and open and the tapes were not inside.

They started a trace, but by Wednesday they concluded the tapes were missing.

Violette said officials as of Wednesday had no reason to believe the tapes were stolen, and the envelope may have simply been damaged during what is typically one of the busiest shipping days of the year.

Violette said he didn't believe the tapes were encrypted, but stressed they are in cassettelike containers that require special equipment and software in order to be read.

"You can't really do anything with this on your laptop or home PC," Violette said.

The tapes contain records for people hired before Jan. 1, 2006.

Those hired after that date are tracked on a different system.

The Dormitory Authority employs about 370 people in Albany, 180 in New York City, 20 in Buffalo and 100 at other locations across the state, Violette said.

It wasn't immediately clear why the tapes also included data from retirees, or former employees, or where they reside.

Hiring and termination dates also are on the tapes.

This isn't the first time a set of state tapes with Social Security numbers has vanished.

In June 2006, tapes with similar data on 1,300 state workers from a variety of agencies disappeared as they were being transported between the state's Harriman campus in Albany to the comptroller's data center in Rensselaer.

Violette said officials from the Dormitory Authority alerted the attorney general and the Office of Cyber Security and Critical Infrastructure Coordination as well as the Consumer Protection Board.

Karlin can be reached at 454-5758 or by e-mail at rkarlin@timesunion.com.

"New chief named for NYRA panel - Spitzer puts Silver appointee in charge of oversight board; change comes amid daunting challenges"

By JAMES M. ODATO, Capitol bureau, Albany, New York Times Union

First published: Thursday, December 20, 2007

ALBANY -- Assembly Speaker Sheldon Silver's newest appointee on the New York Racing Association oversight board has been tapped by Gov. Eliot Spitzer to take over as chairman.

The move is an abrupt change of leadership as the panel's toughest challenges lay ahead.

Spitzer on Wednesday named Steven Newman to the chairman's post now held by Carole E. Stone, who was appointed by Gov. George Pataki in August 2005.

Stone will continue serving her four-year term at Spitzer's request, said Paul Francis, the governor's budget director.

The panel could soon have to take on difficult duties, including making sure racing continues after NYRA's 52-year hold on the state racing franchise expires on Dec. 31.

NYRA's assets and liabilities are due to be turned over to the state, but NYRA claims it owns the Aqueduct, Belmont Park and Saratoga tracks and has threatened to sue.

It is unclear what Newman knows about horse racing.

He essentially ran the comptroller's office in New York City as the first deputy under then-city comptroller Alan Hevesi, and also was a top aide to Hevesi's predecessor, Jay Goldin.

Newman could not be reached for comment.

Silver spokesman Dan Weiller said Madelyn Wils, who was appointed by Silver to the oversight board this past year, had resigned, although he couldn't say why.

Wils, a community activist in Manhattan, was unavailable for comment.

Wils participated in the first oversight board meeting in months on Monday via teleconference call.

She was the only member of the five-person board not to attend the meeting in person.

Stone said Wednesday afternoon that she was unaware Wils had resigned.

She also said she had heard nothing about a leadership change on the board.

Stone, former Civil Service Commissioner George Sinnott and Timothy B. Thornton, of Delmar, a principal in the law firm McNamee Lochner Titus & Williams, were appointed to four-year terms on the board by Gov. George Pataki in August 2005.

"The governor decides upon which of those appointees is chair," Stone said.

"That is within the discretion of the governor."

Senate Majority Leader Joseph L. Bruno also has an appointee on the board, Joseph Torani, an Albany accountant.

Spitzer and the Legislature are negotiating a deal that may help NYRA get out of bankruptcy, turn over the tracks and keep the franchise.

Francis said the talks are progressing well and he expects by year end to have a four-way agreement, including NYRA's approval, and ratification of the deal by the Legislature in early January.

James M. Odato can be reached at 454-5083 or by e-mail at jodato@timesunion.com.

"New York finds allies to fight warming - State's presence at Bali negotiations helps bring Ontario in on regional initiative"

By BRIAN NEARING, Staff writer, Albany, New York Times Union

First published: Thursday, December 20, 2007

ALBANY -- New York's fight against global warming met a receptive international audience during this month's climate negotiations in Bali.

New York was among three states represented at the two-week conference, where U.S. officials -- who at one point faced booing -- agreed only to negotiate future unspecified cuts in carbon dioxide emissions.

Accumulating CO2, a known greenhouse gas emitted from the burning of oil, coal and natural gas, is driving human-caused global warming, according to international scientific consensus.

While the U.S. accounts for a quarter of global warming emissions, the Bush administration opposes mandatory reductions.

"The mood of the delegates was one of, 'We will tolerate the shenanigans of this current administration and wrangle whatever we can, because we know we can work with the states,' " said state Climate Change Director Peter Iwanowicz, who returned from Bali on Saturday.

While there, he found widespread interest in the 10-state Regional Greenhouse Gas Initiative, a plan to reduce CO2 emissions from power plants beginning in 2009.

On Friday, Ontario Environment Minister John Garretsen, who met Iwanowicz during the negotiations, wrote to DEC Commissioner Pete Grannis, asking Ontario be added as an observer to RGGI, which is the first step toward joining.

"New York and Ontario share a lot in common -- the Great Lake, our climate, the air," Garretsen said.

"We have to pressure our federal counterparts to support state efforts to combat climate change."

Under RGGI, each state will auction allowances for annual CO2 emissions that individual plants must buy in order to cover CO2 emissions.

In New York, allowances will be limited to 64.3 million tons annually from 2009 to 2014, dropping by 10 percent from 2015 to 2019.

Other states in RGGI are Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New Jersey, Delaware and Maryland.

"There was a tremendous amount of interest across the globe on auctioning," said Iwanowicz, who held sessions with officials from Ireland, New Zealand, and Australia, where the new environmental minister is Peter Garrett, former lead singer of the 1980s rock band Midnight Oil.

Last month, the U.N. Intergovernmental Panel on Climate Change, which won the Nobel Peace Prize along with former Vice President Al Gore, warned greenhouse gas emissions must decline within 10 to 15 years.

With the U.S., Canada and Japan blocking agreement on specific reductions, the Bali agreement called for the start of two years of negotiations toward emissions targets to replace the expiring Kyoto Protocol.

During the Bali talks, protesters, including some in polar bear costumes, called for agreement on binding cuts.

"Everyone in Bali recognized what the Bush approach is on this," Iwanowicz said.

"They wanted to know where states are going, and what will happen post-Bush."

"The message was the next administration, regardless of what it is, is going to have a dramatically different position."

Iwanowicz said the Bali agreement, while unable to reach specific cuts, was still important.

"We all realize that we can haggle over words, or we can go back to the states and do the hard work to reduce emissions," he said.

"If we wait for two years, we waste two years, precious time we cannot afford to waste."

Nearing can be reached at 454-5094 or by e-mail at bnearing@timesunion.com.

"Aide to Senate minority punished - Liaison between Spitzer, Democrats suspended over allegations she overstepped authority"

By JAMES M. ODATO, Capitol bureau, Albany, New York Times Union

First published: Thursday, December 20, 2007

ALBANY -- The director of intergovernmental relations for Senate Democrats has been suspended without pay for about two weeks amid accusations that she improperly checked into a subordinate's background, people informed of the incident said.

Senate Minority Leader Malcolm Smith Wednesday confirmed Indira Faith Noel was suspended earlier this month from her $104,284-per-year post as a liaison between the Senate minority and the Spitzer administration.

He said she had overstepped her authority in supervising her sole subordinate.

Her suspension came at about the same time as the dismissal of the subordinate, Jean Pierre, an analyst hired by the Senate minority in June.

His salary was $38,103.

"She overstepped her boundaries; he falsified his application," Smith said.

Smith said Pierre was fired for putting down something wrong on his employment application.

Reached last week, Pierre said he would not make public comments about the matter on the advice of his lawyer, Paul Dwyer, who has not returned calls.

Noel said she could not discuss the matter.

She referred inquiries to Senate minority spokesman Curtis Taylor.

Taylor said the office doesn't comment on personnel matters.

He would not confirm that she has been accused of inappropriately seeking Pierre's transcripts.

People familiar with the accusation say Noel sought transcripts from the University of Buffalo, using Pierre's Social Security number and signature without his authorization.

Smith said he did not know what Pierre falsified or what misstep Noel made, and referred further questions to his chief of staff, Mortimer Lawrence, who could not be reached.

Noel has been a legislative aide since 1998, working for Democrats.

She served as a deputy policy director under former Minority Leader David Paterson and also worked for Assemblyman Jeffrion Aubry and Sen. Neil Breslin.

Smith said her performance has been good, and she won't be losing her post.

James M. Odato can be reached at 454-5083 or by e-mail at jodato@timesunion.com.

"$50M sewer expansion sought - With AMD on horizon, Saratoga County board advances project"

By LEIGH HORNBECK, Staff writer, Albany, New York Times Union

First published: Thursday, December 20, 2007

MECHANICVILLE -- The Saratoga County Sewer Commission voted Wednesday to go forward with a $50 million expansion project.

The Board of Supervisors has final say and is expected to take up the issue in January.

The commission does not yet have a financial plan to pay for the project, which would increase the daily capacity of the plant from 23 million gallons to 43 million gallons and make other substantial improvements.

A financial adviser who spoke at the meeting Wednesday said if the commissioners received no state or federal aid and borrowed all the money they needed, users would see a nearly $50 increase per year.

But that is unlikely because that figure doesn't take into account an increase in the number of users.

The average sewer customer pays about $138 per year per unit.

Sewer rates have not increased in seven years.

Chairman Bill Davis said he met with representatives of Sen. Joseph L. Bruno and U.S. Rep. Kirsten Gillibrand, D-Greenport, to talk about possible sources of aid.

Davis said he was offered no promises but found the meeting encouraging.

"In the meantime we have to move forward because I don't want a moratorium on my watch," Davis said.

If all the residential projects waiting in the wings go forward along with an AMD computer chip factory in Malta, the plant will be over capacity by 3 million gallons a day by 2009.

"Lawbreaker Lawmakers - Arguably, about 1-in-5 state legislators has violated the law. How can this be?"

By MARY CUDDEHE, ELLEN GABLER and EMILY PICKRELL, Special to the Times Union

First published: Sunday, December 30, 2007

In a perfect world, elected lawmakers would always obey the laws they alone are entrusted to enact, but public records show that in Albany, lawmakers are anything but perfect.

An investigation for the Times Union by the Stabile Center for Investigative Reporting at Columbia University found that about one-fifth of elected legislators in New York have, by some measure, broken some law in recent years.

While most of those cases were traffic violations, more than a dozen involved acts charged as crimes -- frequently bribery or theft.

Currently, two accused lawmakers have refused to leave office despite a mountain of evidence compiled by citizen grand juries who indicted them for felony crimes -- and legislative leaders have done nothing to officially discipline or remove them.

Assemblywoman Diane Gordon, D-Brooklyn, continues to hold office even after the Brooklyn district attorney released video recordings showing her agreeing to receive a house in exchange for arranging a $2 million land deal for a developer.

She declined to comment.

State Sen. Efrain Gonzalez, D-Bronx, continues to hold office while awaiting trial on federal charges that he funneled $423,000 in taxpayer money through a charity to finance his cigar company, buy Yankees tickets and pay his daughter's tuition.

"You're innocent until proven guilty beyond a reasonable doubt," said Gonzalez, who was re-elected by a landslide in the Bronx last year.

Such cases have become a perennial disappointment for good-government advocates in Albany who for years have pressed for real ethics reform that, when it comes to lawmakers themselves, has never really come.

"I think what most citizens would say to them is how dare you do this to the working men and women of New York," said Barbara Bartoletti, legislative director for the League of Women Voters.

"You are in a cherished position, voted into office by your constituency, and you let them down; you violated their trust."

Two lawmakers charged with driving while intoxicated this year had their driver's licenses suspended after they refused to take a Breathalyzer test: Assemblyman Karim Camara, D-Brooklyn, and Sen. John Sabini, D-Queens.

Sabini said it was inappropriate for two student journalists to surprise him in the Capitol this month with a video camera and ask, on behalf of voters, if he was drunk when police arrested him in Albany.

"No, I pleaded not guilty," he said.

Like many lawmakers, Sabini bristles at the suggestion he deserves to be labeled a lawbreaker in the press before his day in court.

"I'm only charged at this stage," he said.

Sometimes lawmakers advocate legislation even as they violate the letter or spirit of the laws they propose.

Nancy Calhoun, a Republican assemblywoman from Blooming Grove, has called herself "a prime advocate for fighting crime."

In 2005, the same year she co-sponsored a bill to strengthen anti-stalking laws, Calhoun pleaded guilty to two counts of second-degree harassment for stalking an ex-boyfriend.

The case was subsequently sealed in Orange County.

Rarely, a lawmakers admits his or her mistake and becomes a determined advocate to strengthen the law.

Assemblyman Charles Lavine, D-Nassau, received a ticket for speeding in October 2006.

Since then, Lavine has voted in favor of cameras that catch speeders and co-sponsored a bill to double fines for speeding in a school zone.

"In an age in which few accept responsibility for their faults, you may find it refreshing to know that I actually was guilty," Lavine said.

Since 2000, 13 members, past and present, occupying one of the 212 seats in the New York state Senate and Assembly combined, faced criminal charges or were convicted of crimes.

Another 10 lawmakers have had their driver's licenses suspended, typically for failing to respond to a court summons.

Another 10 have been cited for speeding, driving while talking on a cellphone, ignoring a traffic signal or driving without a seat belt.

Still another 15 had a traffic violation that prompted them to attend class to erase points from their driving record.

That's 48 lawmakers implicated in or found guilty of lawbreaking.

One former assemblyman, Clarence Norman, formerly chairman of Brooklyn's Democratic Party, is currently serving a 3-to-9-year sentence in state prison for stealing the public's money and selling his party's control over judgeships.

Adult arrest rates for crimes within large populations in the United States are measured in different, sometimes flawed ways by states and the federal government, but depending on the criteria, they can range from a few percentage points to more than 5 percent.

That suggests the arrest rate for the state Legislature, arguably just above 5 percent, may be normal.

However, these are elected lawmakers.

While outright crime is the exception rather than the norm at the Capitol, government watchdog groups bemoan a system of legal loopholes in Albany that encourages bribery and a legislative culture prone to winks and nods with only private wrist-slapping for any ethics violations.

"I don't think it's just a few bad apples."

"I think the system is just ripe for corruption," said Rachel Leon, the former executive director of Common Cause, a citizens' group that lobbies for clean elections and ethical standards for elected officials.

"In most states, if you have one arrest, you get reform handed to you on a platter."

"In New York, you get person after person after person" arrested without censure, she said.

"It's an entrenched system, an old-world style of politics that really needs to be updated."

Voters should not hold their breath.

In March 2007, a sweeping ethics reform bill approved by the Legislature combined the state's Ethics and Lobbying commissions under the new Commission on Public Integrity.

But during the bill's drafting the Legislature insisted on a separation of powers from the new commission's authority, which has effectively left lawmakers in charge of policing their own ethical misconduct -- just as they had, or had not, under their existing ethics laws.

In fact, the former Legislative Ethics Committee, comprised solely of lawmakers chosen by legislative leaders, never rebuked a single legislator for any ethics violations during its 20-year existence.

That inaction was predictable of what happens when powerful people are left alone to judge and punish themselves, said David Grandeau, formerly director of the now-disbanded state Temporary Commission on Lobbying.

"It is very difficult to perform your job if you're worried you'll be fired for it," Grandeau said.

"These integrity commissions need to have not only independence, but there needs to be an effective buffer for the employees."

"You are going to have bad people doing bad things throughout the country," Grandeau said.

"What we do have is a structure that enables it."

Albany observers say that a lack of campaign finance control contributes to corrupt behavior.

New York's current campaign finance laws let corporations receiving economic development aid and unions benefiting from public contracts contribute huge sums to politicians, creating the perception of a "pay-to-play" system, according to a 2006 Brennan Center for Justice study.

Direct corporate donations to politicians are illegal in federal elections.

Some New York legislators have gone to town with their campaign funds, financing everything from lavish vacations to college tuition to private cellphone bills.

In 2001, Senate Majority Leader Joseph L. Bruno, a Republican, used campaign funds to buy a swimming pool cover for his property in Brunswick, later claiming that he used the area for political events.

Former state Sen. Guy Velella, R-Bronx, used his campaign funds for his legal defense against charges he had accepted bribes.

He eventually pleaded guilty to conspiracy charges for steering public works contracts to favored bidders who, in turn, made payments to law firms he controlled.

A lawmaker accused of a crime in New York does not automatically lose office.

Some win re-election.

Some don't even try.

Former state Sen. John "Randy" Kuhl Jr., R-Hammondsport, pleaded guilty to driving while intoxicated in September 1997.

That conviction surfaced in 2004, when he was elected U.S. representative of the 29th District.

In 2003, former Assemblywoman Gloria Davis, D-Bronx, agreed to resign and spent two months in jail for collecting state travel expenses for free automobile trips to Albany.

She also admitted receiving $24,000 from a contractor she helped reward with an $880,000 contract.

Though former Assemblyman Roger Green, D-Brooklyn, was convicted of petty larceny in 2004 for also using free rides, he was re-elected.

In 2006, former assemblyman and labor leader Brian McLaughlin, D-Queens, pleaded not guilty to 44 charges, including labor bribery and money-laundering.

He was indicted for stealing $2.2 million from, among other groups, a Little League baseball team.

McLaughlin resigned.

Former Sen. Ada Smith, D-Queens, was found guilty of second-degree harassment in Albany for throwing hot coffee at an aide who had commented on her weight.

She was fined $250, ran for re-election in 2006 and lost in a primary race.

"What all these indictments say generally about Albany is that the environment is still ripe" for corruption, said Bartoletti of the League of Women Voters.

"Until we close loopholes on ethics and campaign reform, we'll continue to have these kinds of problems," Bartoletti said.

"We have the most loophole-ridden law in the nation."

This year's ethics reform law has been widely panned as ineffective and an agreement for some campaign finance reform fell apart amid squabbling between Bruno and the governor, but some good government groups view the recent conviction of Norman as a sign that accountability is possible in the courts.

"Any political leader that would ever again force somebody to pay money in exchange for support will do so at their own peril," Brooklyn District Attorney Charles Hynes declared this year after finishing his case against Norman.

"The jury spoke loud and clear that this kind of conduct will not be tolerated."

Others are more skeptical, saying that without true reform of campaign finance rules and an overhaul of ethics oversight for lawmakers, change will never come.

"The only way to force them to do what's right is exposure," said Grandeau.

"If they know what they do today they are going to read about in tomorrow's paper, they think twice."

Times Union staff writer Irene Jay Liu, a graduate of the Stabile Center for Investigative Journalism at Columbia University's Graduate School of Journalism in Manhattan, contributed to this report. Mary Cuddehe is a student at Columbia's journalism school. Ellen Gabler and Emily Pickrell are graduates of the Stabile Center at Columbia. They prepared this story under the supervision of Times Union Senior Editor Bob Port, who can be reached at 454-5064 or e-mail at bport@timesunion.com.

"Waiting for AMD - AMD hasn't yet decided to build a chip plant in Malta; the reason why isn't entirely clear"

By LARRY RULISON

First published: Sunday, December 23, 2007

The waiting is the hardest part when it comes to Advanced Micro Devices Inc.

The Sunnyvale, Calif.-based computer chip maker announced plans 18 months ago to build a $3.2 billion factory at the Luther Forest Technology Campus in Malta.

But the first shovel of dirt has yet to be turned on what is considered to be the largest economic development project in state history.

Yes, yes, yes we all know by now that the $1.2 billion incentive package from the state of New York gives AMD until July 2009 to make a decision on whether to move ahead with the project.

But the reason AMD has not yet made up its mind is more complex than that.

And the company itself has not been entirely forthcoming on all of the factors going into its decision-making process for when to build the chip factory, or "fab" as it is known in the industry.

That includes the behind-the-scenes details on a new manufacturing strategy designed to improve the company's financial condition.

AMD executives have declined to say exactly how the company will operate under this new "asset smart" plan, and that has forced Wall Street analysts and the media to speculate on how it will impact two existing factories in Dresden, Germany, as well as the plans for New York.

John Greenagel, a former AMD spokesman who is now director of communications for the Semiconductor Industry Association in San Jose, Calif., says it is important for the public to understand the financial risk that chip makers undertake in building a new fab, which cost at least $3 billion these days.

No decision is made lightly, he said.

Greenagel likes to use a quote from AMD board member Robert Palmer in the book "The Spirit of AMD."

Palmer is the former chief executive officer of Digital Equipment Corp., a computer maker that was acquired by Compaq, now Hewlett-Packard, in the late 1990s.

"Playing in the semiconductor industry has always been like playing Russian roulette with a twist."

"You put the gun to your head and pull the trigger, and four years later you find out if you blew your brains out," Palmer writes, according to Greenagel.

Greenagel says that's a pretty good summary of the risks involved.

"You've got to be very confident that you can sell the output of that fab," he said.

"Otherwise, the capital costs will eat you alive."

In fact, when AMD and state officials made the historic announcement at the Albany NanoTech complex in June 2006, the company said that in addition to the $3.2 billion cost to build the factory, it would also spend $2 billion at the facility during the first five years of operation.

That raises the company's expected short-term investment at Luther Forest to $5.2 billion equal to AMD's revenue for all of 2006.

That is probably why AMD founder Jerry Sanders, known for his bravado and independent spirit leading the company from 1969 to 2002, reportedly once said that only "real men have fabs."

Of course in many ways, New York state politicians like Senate Majority Leader Joseph Bruno, R-Brunswick, and former Gov. George Pataki put the state in the position of raising public expectations of the project while giving AMD a window of more than three years to make up its mind.

But Bruno spokesman Mark Hansen said the timing of the announcement on June 23, 2006, was a critical component of the political process that ultimately budgeted $650 million in cash for AMD.

He said it was important for the legislature to pass the funding bill passed before the legislative session concluded in June of that year.

Money has played a huge part in the uncertainty.

After losing $1.6 billion and more than half of its stock market value this year in a fierce price war with rival Intel Corp., AMD is trying to come up with a new manufacturing formula to balance its assets, capital costs and future earnings.

AMD has also gone out and raised more cash, selling $622 million in stock last month to a company owned by the government of Abu Dhabi.

"Asset smart," the company's new manufacturing model, likely entails some mix of in-house manufacturing at its own fabs and outsourcing manufacturing to companies called foundries that operate in Asia.

Still, all of this has to be worked out before AMD can decide when it will be best to start producing chips in New York.

AMD spokesman Travis Bullard reiterated that AMD is right on schedule.

The company has completed its project design process, and will start making presentations to local town planning boards early next year.

The company still must seek state environmental approvals.

"At the end of the day, we're still in the really early part of that window," Bullard said.

"We're still evaluating these complex factors."

"And it's a question of when."

"It's not a question of if."

"It requires patience."

"And we're all anxious to get going as well."

Even folks in Austin, Texas where the semiconductor industry exploded in the 1980s were anxious at first.

Pike Powers, an Austin attorney who helped lure many high-tech companies to that city working for state government and the business community, said residents once had their doubts about whether the first fabs would get built.

"Sure, we got nervous," Powers said.

"But over time, we learned that the significant capital costs involved were so disproportionate to anything else that it required a degree of understanding of those issues and a lot of patience."

Michael Relyea, executive director of the Luther Forest Technology Campus Economic Development Corp., the nonprofit overseeing the development of Luther Forest, says the waiting for AMD has actually been a good thing.

He is working to put the infrastructure in place at the 1,350-acre tech park, most of which is still forest.

And he and other Saratoga County officials have also been trying to prepare the community for the explosive growth that would be expected with a semiconductor factory employing 1,200 people.

"That time lapse has actually been helpful because it helps us to do this right," Relyea said.

"By having that extra time, it's afforded the community time to really explore what they needed to do future planning."

Not everyone, however, believes the wait has been entirely good.

Greenfield resident Ron Deutsch, executive director of New Yorkers for Fiscal Fairness, an Albany political watchdog group, estimates that about $150 million in public money is being spent on water, sewer and road expansion to accommodate AMD before the company makes up its mind.

"It seems like the state and county, primarily the county, are looking at bearing a lot of the cost before AMD makes a decision," he said.

"What are you going to do if AMD doesn't come?"

"It's just silliness."

"It is complete speculation at this point."

Pat Foye, downstate chairman of Empire State Economic Development Corp., the state agency that negotiated with AMD, knows the process can be difficult for the public.

But he says his team is in regular contact with AMD.

"We know that they are working hard to improve their business operations and move forward with the Luther Forest project," Foye said.

"We are monitoring their progress, and we're rooting for their success."

Larry Rulison is a Times Union business writer. He can be reached at 454-5504 or by e-mail at lrulison@timesunion.com.

"The faltering AMD project is no longer a realistic option for New York"

Albany, New York Times Union

First published: Sunday, December 30, 2007

Nobody likes to be a skunk at the garden party, but the Dec. 23 Perspective story, "Waiting for AMD" did the right thing in preparing the Capital Region for the likely cancellation of the AMD chip-fab plant project.

Notwithstanding the state's expenditure of more than $150 million on infrastructure and the promise of $1 billion more in aid (an absurdly expensive and ineffective approach to economic development), it is clear now that AMD is stringing New York along.

AMD is a company beset by major problems.

In the last three quarters it lost $1.6 billion -- and it's not clear when it will return to profitability.

The acquisition of graphics-chip maker ATI for $5.4 billion was a costly mistake that saddled the company with massive debt and restructuring charges.

It is about to borrow $2 billion more, at the same time that profit margins are being squeezed by competition with Intel, and its stock is down 44 percent this year to date.

With AMD's reported operating loss of $226 million in the third quarter, and a net loss of $396 million, AMD is even scaling back plans to convert older facilities in Germany to newer chip-making equipment, a much less expensive proposition than building new fabs.

The worst news for New York is that AMD responded to its problems with a new strategy called "asset-light" manufacturing, meaning that it will outsource more of its chip fabrication to third-party manufacturers.

Given how central this "asset-light" strategy is to restoring the company's finances and the confidence of investors on Wall Street, is it realistic to bank on AMD building a very costly new chip-fab plant in New York?

The answer is no -- particularly now that CEO Hector Ruiz (who approved the project) has announced that he will be leaving the company.

If New York had a normal business climate, with average costs of doing business and average taxes, a company in financial difficulties might take advantage of the offer of $1 billion in state aid.

But in the last 10 years we've done almost nothing to slow what are now the highest costs of doing business in the nation.

Instead we've banked on an approach that requires politicians and bureaucrats to guess which industries have the best growth prospects, and which companies within those industries are the strongest, and cajole them to build here with the promise of huge infusions of state money.

This is a fool's game that can't succeed.

It is unfair to businesses already here, and does nothing to help New York.

MARK ALESSE

Delmar

The writer was a lobbyist for small business for 18 years, and worked in the Assembly and Senate on economic development.

REUTERS

"UPDATE 2-AMD CEO says no plans to step down in 2008"

Tue Dec 11, 2007 4:29pm EST

By Duncan Martell

SAN FRANCISCO, Dec 11 (Reuters) - Advanced Micro Devices Inc (AMD.N: Quote, Profile, Research) Chief Executive Hector Ruiz says he has no plans to step down as head of the microprocessor maker next year.

AMD has in the past two years struggled with market share losses to its far larger rival, Intel Corp (INTC.O: Quote, Profile, Research), in the market for microprocessors.

It is banking much of its turnaround on its Barcelona processor, which was launched in September, but has so far been hampered by an inability to ship as many of the processors as it would like.

Ruiz said in an interview with CNBC Europe to be broadcast later this week that President and Chief Operating Officer Dirk Meyer is being groomed to succeed him as CEO.

"Ruiz has to turn the ship around before he can turn over the helm," said Ashok Kumar, an analyst at CRT Capital Group LLC.

"He and his team need to focus on executing and delivering what customers and the markets expect."

Caris & Co. analyst Daniel Barenbaum wrote in a Monday note to clients that disappointing reviews of AMD'S desktop quad-core microprocessor and a lack of availability of its higher-speed Barcelona chip confirm that "AMD continues to struggle with new product cycles."

The interview is scheduled to be broadcast on Thursday at 2300 Central European Time (2200 GMT), the same day that AMD holds its financial analyst conference in New York, the network said.

An e-mail including excerpts of the interview was sent to Reuters on Tuesday and was confirmed as authentic by CNBC.

"We started doing this (the succession planning) four years ago and I'm delighted that Dirk is a strong player," Ruiz told CNBC.

"When the time comes for me to hand the reins over to him, it's going to be fantastic."

Asked how soon that would be, Ruiz said, "I can't tell you that, but it's not any time soon."

Asked whether he would step down in 2008, Ruiz said:

"Not next year."

Shares of AMD fell 11 cents to close at $9.07 and shares of Intel fell 85 cents to $26.93.

Both stocks gave up earlier gains after the Federal Reserve Bank cut short-term interest rates less than hoped for earlier on Tuesday to help the U.S. economy withstand tightened credit and a prolonged housing market slump.

Many on Wall Street had thought the Fed might cut the federal funds rate by 0.5 percentage point, rather than the 0.25 percentage point cut it made, to 4.25 percent.

(Reporting by Duncan Martell; Editing by Jeffrey Benkoe and Dave Zimmerman)

http://www.reuters.com/article/technology-...153631020071211

"Saratoga water line hits a snag - State is holding up permit needed to complete construction, citing questions about need and users"

Albany, New York Times Union

November 27, 2007

BALLSTON SPA - Facing a battle with the state, the Saratoga County Water Authority may have to relinquish control over its $67 million water project.

The state Department of Environmental Conservation gave the county Board of Supervisors a permit in 2006 to install a waterline from Moreau to Malta, but refuses to transfer that permit to the water authority, which took over the project in February.

Without that document transfer, the water authority cannot borrow the money it needs to finish construction of the 28-mile water line.

Construction is well under way on the line, which will draw water from the Hudson River in Moreau and bring it south to the Luther Forest Technology Campus in Malta.

Water supply is one of the linchpins in the deal to bring computer-chip manufacturer AMD to Saratoga County.

Supervisor John Lawler, R-Waterford, the chairman of the water authority, said he thought getting the permit would be a simple matter of changing the name on the top.

"We did not envision this type of bureaucratic foot-dragging," Lawler said Monday.

The water authority has moved forward since requesting the name change on the permit, putting dozens of miles of pipeline in the ground and racking up $6 million in bills - which it then turned to the county for the money to pay.

Lawler said $1 million in grant money has come from the state to repay the debt to the county and he expects another $14 million from other state grants.

"We sent a notice of an incomplete application to the water authority last week," said DEC spokesman Yancy Roy.

"We need to know more about the impact of the project."

Roy, quoting from the letter sent to the water authority, said: "the notice of incomplete application cited that certain subscribers might have withdrawn from the project, raising the question of public necessity under the appropriate environmental regulations."

Clifton Park, which is the county's largest municipality, withdrew from the project about the time the water authority took control.

This permit process hitch isn't the only roadblock to the project.

Only a few of the potential users have signed contracts to buy water, to date: Ballston, 375,000 gallons a day; Wilton, 300,000 gallons a day; and the Luther Forest Technology Campus Economic Development Corp., a subsidiary of the Saratoga Economic Development Corp., 2.4 million gallons a day.

Over the summer, the state Department of State halted work in Moreau because the authority didn't have a building permit for its administration and filtration building.

Also, a handful of residents and businesses have refused to allow the waterline to cross their lands.

One landowner, the YMCA of Saratoga, may find its property taken by eminent domain because, according to Lawler, the association wants $150,000 for its easement.

"I wish we could make everybody happy, but we can't," he said.

Alex Mackay, who wants to sell water to the tech park, has also filed a lawsuit against the state challenging the constitutionality of allowing the water line to be installed in Moreau Lake State Park.

Citing the change in potential subscribers, Roy said, "The DEC requested an updated application from the water authority and, upon receiving that application, we will review it."

If the permit issues don't get resolved soon, Lawler said, it may be better for the Board of Supervisors to resume control because, with the original permit, they could get the necessary money quickly.

"We thought it would be easier to have a focused group run the project, just as we have a sewer commission, but the county has all its permits and it would be a lot easier for the county to build," he said.

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

Posted by Shirley Temple on December 29, 2007 6:08 PM: In re Upstate vs. Downstate:

While the City of New York and the surrounding suburbs on Long Island and Westchester, Rockland, and Dutchess Counties account for probably half the population of the State of New York, that doesn't mean people from the City should run the place.

Sure, the Assembly is supposed to represent the people of New York and reasonably, City and surrounding area districts should have the lion's share of representation in that body.

However, where does the Senate stand?

Senate districts are, for all-intents-and-purposes, merely larger Assembly districts.

What do they correspond to?

Nothing.

The New York State Senate should track the Senate before the 17th Amendment.

The County Legislatures or the people of a county voting at large, should elect one senator to represent them.

That way, the interests of the people of New York City and its suburbs will be balanced in the legislature against, largely, the interests of the people of Upstate New York. In that way, even if one party controls the legislature, as seems destined, the different interests of the various regions will be represented in government.

Regardless of what one thinks of Joe Bruno, like it or not, he is basically the only person from upstate New York with any real power.

Without him and the Senate Republicans, who is representing the interests of Upstate?

No one.

With the upcoming elections and the likely Republican loss of the Senate, the third man in the room will be ANOTHER New York City Democrat.

Is that what this state needs?

JOHN GALT RESPONDS: Shirley Temple, dude ....

Just to let you know that I thought that this post of yours right above here raised some important issues that need to be dispassionately discussed in here in this coming new year ....

Your point about senators and senate districts certainly needs discussion .....

AND WHAT IS THE UNDERLYING PURPOSE OF OUR HAVING A SENATE HERE IN NYS GOVERNMENT?

We need some research on that specific topic ....

WHY DO WE HAVE A SENATE IN OUR CONSTITUTIONAL FORM OF GOVERNMENT HERE IN NYS?

And so ...

Posted by John Galt on January 2, 2008 6:56 PM

http://www.nydailynews.com/blogs/dailypoli...d-ends-158.html

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

In re John Galt:

Thanks for digging up my post from a few days ago.

I didn't think it got the recognition it deserved, if I may be so bold.

I'd actually have to look into the creation of the New York State Senate.

Having read Madison's Notes on the Constitutional Convention, I have a pretty good idea why we have the national Senate.

However, so far as I know, there isn't one good place to find the debates regarding the creation of the New York State Senate.

I'd have to look into it more.

Honestly though, there needs to be a major overhaul of the New York State Senate.

Either it should be shuttered entirely, rebuilt in the manner I suggested above, or go the way of the House of Lords in Britain (which I almost wrote as "House of Lards") and be a vestigial body where old men go to die.

Posted by Shirley Temple on January 2, 2008 10:23 PM

http://www.nydailynews.com/blogs/dailypoli...8.html#comments

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

Oh, your post got recognition, alright, Shirley Temple ....

Which is why I saved it ....

It just didn't get the discussion that it requires ....

It was just a matter of timing is all ...

That was a busy weekend on other matters ...

Your post needs some carefaul thought and reflection, which is something that I have been doing on that subject for some time now ...

And I have had the same problem as you ...

Trying to research as to exactly where and why we have a senate in NYS ....

Clearly, from our state history, we are not stuck with the senate in the form that it is today ....

At one time, we had something like 300 senators here in NYS ....

And PORK up the ying-yang ....

Now we have less senators, but we still have the PORK ....

So something in the equation is out of whack, and I think your post needs more discussion, which is why I saved it and brought it forward in here ...

And so ....

Posted by John Galt on January 3, 2008 6:31 AM

http://www.nydailynews.com/blogs/dailypoli...8.html#comments

THE NEW YORK DAILY NEWS DAILY POLITICS BLOG:

Getting back to you, Shirley Temple ....

Here is where OUR NYS history starts with respect to our state Constitution ...

Note that the Philadelphia Constitutional Convention that gave us the national government and the U.S. Senate is still 10 years and a war of rebellion to be won in the future .....

From The Avalon Project at Yale Law School.

The Lillian Goldman Law Library in Memory of Sol Goldman

The Constitution of New York : April 20, 1777

IN CONVENTION OF THE REPRESENTATIVES OF THIS STATE OF NEW YORK,

Kingston, 20th April, 1777.

Whereas the many tyrannical and oppressive usurpations of the King and Parliament of Great Britain on the rights and liberties of the people of the American colonies had reduced them to the necessity of introducing a government by congresses and committees, as temporary expedients, and to exist no longer than the grievances of the people should remain without redress;

And whereas the congress of the colony of New York did, on the thirty-first day of May now last past, resolve as follows, viz:

"Whereas the present government of this colony, by congress and committees, was instituted while the former government, under the Crown of Great Britain, existed in full force, and was established for the sole purpose of opposing the usurpation of the British Parliament, and was intended to expire on a reconciliation with Great Britain, which it was then apprehended would soon take place, but is now considered as remote and uncertain;

"And whereas many and great inconveniences attend the said mode of government by congress and committees, as of necessity, in many instances, legislative, judicial, and executive powers have been vested therein, especially since the dissolution of the former government by the abdication of the late governor and the exclusion of this colony from the protection of the King of Great Britain;

"And whereas the Continental Congress did resolve as followeth, to wit:

" 'Whereas His Britannic Majesty, in conjunction with the lords and commons of Great Britain, has, by a late act of Parliament, excluded the inhabitants of these united colonies from the protection of his Crown;

and whereas no answers whatever to the humble petition of the colonies for redress of grievances and reconciliation with Great Britain has been, or is likely to be, given, but the whole force of that kingdom, aided by foreign mercenaries, is to be exerted for the destruction of the good people of these colonies;

and whereas it appears absolutely irreconcilable to reason and good conscience for the people of these colonies now to take the oaths and affirmations necessary for the support of any government under the Crown of Great Britain, and it is necessary that the exercise of every kind of authority under the said Crown should be totally suppressed, and all the powers of government exerted under the authority of the people of the colonies for the preservation of internal peace, virtue, and good order, as well as for the defense of our lives, liberties, and properties, against the hostile invasions and cruel depredations of our enemies:

Therefore,

" 'Resolved, That it be recommended to the respective assemblies and conventions of the United colonies, where no government sufficient to the exigencies of their affairs has been hitherto established, to adopt such government as shall, in the opinion of the representatives of the people, best conduce to the happiness and safety of their constituents in particular, and America in general.'

Document Information

The Avalon Project : The Constitution of New York : April 20, 1777

The document is located at this URL : http://www.yale.edu/lawweb/avalon/states/ny01.htm.

Posted by John Galt on January 3, 2008 6:58 AM

http://www.nydailynews.com/blogs/dailypoli...8.html#comments