The Buffalo Billion fraud and bribery scheme: corruption and pay-to-play, a symbol of everything they’re doing
When New York’s Democrat Governor Andrew Cuomo gushed over SolarCity’s new solar panel factory in Buffalo, New York, the audience, likely, didn’t grasp the recently-revealed meaning of his words: “It is such a metaphor—a symbol of everything we’re doing.”
The 1.2 million square foot building, being built by the state of New York on the site of a former steel plant, is looking more and more like another political promise of help for one of the poorest cities in the state that ends up enriching cronies without ever achieving any potential for the people.
Yes, it is a symbol of everything they’re doing.
Previously, during her first senatorial bid, Hillary Clinton also promised jobs to the economically depressed region of the state of New York—200,000 to be exact. Citing a report from the Washington Post, CBSNews states: , CBSNews states: “Jobs data show that job growth stagnated in Upstate New York during her eight years in office, the report said, and manufacturing jobs dropped by nearly a quarter.” The Post’s extensive story reveals that jobs never materialized—despite “initial glowing headlines.” It claims: “Clinton’s self-styled role as economic promoter” actually “involved loyal campaign contributors who also supported the Clinton Foundation.” Through federal grants and legislation, she helped steer money to programs, companies, and initiatives that benefitted the donors but failed to reverse the economic decline of the region.
Now, new corruption charges reveal the same pay-to-play model linked to Cuomo’s upstate “Buffalo Billion” economic revitalization plan—and the promised jobs, also, look they will never materialize.
Back on January 5, 2012, Cuomo announced a $1 billion five-year economic development pledge for Buffalo. It was to be the governor’s banner economic initiative with the SolarCity factory as the cornerstone and a pledge of 1,460 direct factory jobs. Other companies, including IBM and a Japanese clean-energy company were also lined up.
With the state-of-the-art solar panel factory ready for equipment to be installed, the wisdom of the entire program is being scrutinized—and is coming up short.
First, on September 22, two of Cuomo’s closest aides—along with several others—were charged in corruption and fraud cases involving state contracts worth hundreds of millions of dollars. Addressing the press at his Manhattan office, U.S. Attorney Preet Bharara asserted: “that ‘pervasive corruption and fraud’ infested one of the governor’s signature economic development programs. Companies got rich, and the public got bamboozled,” reports The Observer. Bharara described the bid-rigging and bribery arrangement: “Behind the scenes they were cynically rigging the whole process so that the contracts would go to handpicked ‘friends of the administration’—‘friends’ being a euphemism for large donors. Through rigged bids, state contracts worth billions of dollars in public development monies, meant to revitalize and renew upstate New York, were instead just another way to corruptly award cronies who were willing to pay to play.”
The 79-page criminal complaint notes that campaign contributions to Cuomo poured in from people connected to the bribe-paying companies as soon as those businesses began pursuing state projects.
One of the companies that received the lucrative contracts was LPCiminelli—run by “Cuomo mega-donor” Louis Ciminelli. He allegedly offered bribes to Cuomo confidante Todd Howe—who has admitted to pocketing hundreds of thousands of dollars from developers to rig bids on multimillion-dollar state contracts linked to Buffalo Billion projects.
Ciminelli received the $750 million contract to build the SolarCity plant. The Buffalo News cites Bharara as saying: “the state’s bidding process for the factory being built for SolarCity at RiverBend in South Buffalo turned into a ‘criminal’ enterprise that favored LPCiminelli, where company executives were given inside information about how the deal was to be awarded.”
Part of Cuomo’s deal with SolarCity—in which the state owns the building and equipment with SolarCity leasing it under a 10-year deal—requires the company to meet a timetable of job-creation quotas or pay hefty penalties. Even before the building was complete, however, the company slashed its job commitment from 1460 to 500. According to the Investigative Post, SolarCity claims it will still employ the original number, but due to automation, the majority of them will not be at the Buffalo plant. With the state’s $750 million investment, that works out to $1.5 million per manufacturing job. In a press release, Cuomo promised 1460 “direct manufacturing jobs at the new facility.”
Even the 500 jobs will only materialize if the plant actually starts production—currently slated for June 2017. SolarCity’s future is, as Crain’s New York Business puts it: “uncertain.”
Amid the company’s myriad problems are the facts that it has never been profitable, nor does it have manufacturing experience.
In February 2014, SolarCity’s stock price peaked at about $85 a share. Today, a share is less than $20. Microaxis gives it a probability of bankruptcy score of 48 percent. Crains reports that it posted a $251 million loss in Q1 2016 and a loss of $230 million in Q2. To “stop the bleeding,” Elon Musk (a donor to both the Obama and Clinton campaigns and the Clinton Foundation), who owns more than 20 percent of the company, announced that Tesla (of which he also owns more than 20 Percent) would purchase SolarCity—this after as many as 15 other potential buyers and investors looked at the company and decided to pass. SolarCity even considered selling the solar panel manufacturing business.
Both SolarCity and Tesla are, according to the Buffalo News, facing a “cash bind”—this despite receiving billions in federal and state grants and tax credits as I’ve previously addressed. Tesla is described as “cash-eating electric vehicle and battery making businesses.” For SolarCity, its model—which finances its solar panel installations, in order to make a profit on a lease that can be as long as 30 years, while it collects the lucrative government incentives worth billions (a practice for which Solar City is currently under Congressional investigation)—requires constantly raising new money from investors. Once the Tesla deal was announced, SolarCity’s lenders started to pull back.
The Buffalo News reports: “Stock in SolarCity…now trades for $4 a share less, or 19 percent less, than what Tesla is offering—a gap indicating that investors are uncertain the deal will be completed.” Additionally, the deal is being challenged by four separate lawsuits—which could delay the deal. Addressing the merger, one analyst said: “We see a lot more that can go wrong than can go right.”
Then there is the manufacturing angle. Originally, the Buffalo plant was going to manufacture high-efficacy solar panel modules developed by Silevo—a company SolarCity bought in 2014. Crain’s reports that it will instead produce complete solar roofs. Something it says “Dow Chemical recently abandoned after five years because it could not find a way to make a profit on the technology.” But then, the Buffalo News says: “The initial production in Buffalo is expected to include photovoltaic cells that SolarCity purchases from suppliers and are used in the products that will be assembled in the South Park Avenue factory.”
Whatever the plant builds or manufactures, getting it operating will be expensive—even with the New York taxpayers owning the building and equipment—and will drain scarce cash from SolarCity at a time when its financing costs have increased.
Buffalo residents wonder if they’ll be stuck with the world’s largest empty warehouse and without the promised jobs.
No wonder the entire project is in doubt. Because of the Cuomo administration corruption allegations, other proposed job-creators, including IBM, have pulled out until the probe is completed.
For now, Cuomo is not a part of the criminal complaint—though his name is mentioned many times—and he claims he knew nothing about it, nor does he think he’s a target of the ongoing federal probe. “It is almost inconceivable the governor didn’t know what was going on,” Doug Muzzio, a professor of public affairs at Baruch College, said. “And if he didn’t know what was going on, you can argue he should have known.”
Bharara has suggested that the better name for the program would be: “The Buffalo Billion Fraud and Bribery Scheme.”
Yep, the Buffalo Billion project is a “symbol” of the political promises and crony corruption—“everything we’re doing”—that takes taxpayers dollars to reward political donors and then walks away when the jobs don’t materialize.
The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy—which expands on the content of her weekly column. Follow her @EnergyRabbit.