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The New York Times last week exposed the tangled web of questionable financial dealings, political fundraising and federal investigations surrounding a key player in the future of Niagara Falls, Empire State Development Corporation Chairman Charles Gargano.
Gargano oversees the operations of USA Niagara, the quasi-public agency headed locally by Michael Wilton. In a copyrighted Aug. 19 article, Times investigative reporter Leslie Eaton raised serious questions concerning Gargano's positions on the boards of directors of no fewer than five troubled companies -- including two accused of bank fraud, tax evasion and securities fraud -- while at the same time serving as the head of the state's most powerful economic development agency.
Gargano's business practices were questioned by state legislators following his 1995 appointment and, between 1999 and 2001, he was under criminal investigation by the Manhattan district attorney's office. The investigation was suspiciously dropped in January, 2001, within days of George W. Bush taking office. Gargano is a major Republican fundraiser and a close personal friend of both Gov. George Pataki and the president.
Niagara Falls marks Gargano's second flirtation with the possibility of Indian gaming. In 1993, he took a seat on the board of directors of Alpha Hospitality, a company trying to open a casino in partnership with the St. Regis Mohawks. He resigned the position and sold his Alpha stock in September, 1995, after coming under fire from legislators for what they saw as a clear conflict of interest.
The troubled company was heavily in debt and losing money during Gargano's term on the board and, in March of this year, federal prosecutors in Manhattan handed down a 21-count indictment accusing Alpha's president, board chairman and several associates of engaging in a $42 million scheme to defraud banks and avoid taxes.
Alpha Chairman Stanley S. Tollman is a longtime Gargano associate and a major Republican contributor who is currently a fugitive from justice.
Another of Gargano's recently indicted business associates is Anthony D'Amato -- no relation to Sen. Al D'Amato -- who was charged by federal prosecutors with securities fraud two weeks ago.
Both Gargano and D'Amato served on the board of directors of a company called Eagle Building during 2000 and 2001. The company first claimed to be selling masonry building blocks in India and then, following the Sept. 11 terrorist attacks, claimed to have developed a technology to detect explosives at airports. Prosecutors allege that there was no truth to either claim.
According to the company's annual report, Gargano owned more than 33,000 Eagle shares in 2000. The shares were valued at as much as $12 earlier this year, prior to the fraud allegations, when they fell to 25 cents. It is unclear when Gargano divested himself of his holdings in the company, or how much he made on the deal.
Gargano says he cut his ties with Eagle last Oct.12, leaving D'Amato -- a major contributor to the Republican Party who donated $25,000 to the 2001 President's Dinner Committee -- to face the charges alone. In a recent response to the charges, D'Amato cited his Fifth Amendment privileges against self-incrimination.
Through a spokesman, Gargano declined comment on the Times story. Perhaps his experiences in earlier investigations have given him some insight on how to handle the press.
His first brush with the criminal justice system came in 1981, when he was a senior executive at J.D. Posillico, a major Long Island construction company accused of rigging bids on a sewer contract. The company paid a $315,000 settlement, without having to admit to any wrongdoing.
Gargano was also the subject of a two-year investigation by Manhattan District Attorney Robert Morgenthau, that began when Gargano was poised to chair the Bush fundraising campaign in New York. To avoid controversy, the fundraising post was given to someone else, although Gargano continued to aggressively solicit contributions.
The investigation began in 1999, looking into allegations that Empire State Development officials misspent funds from annual receptions to honor Italian-Americans. Later that year, Paolo Palumbo, an old friend of Gargano who occasionally wrote speeches for him, pleaded guilty to a charge of bribery and began cooperating with investigators. The investigation expanded to include Gargano's involvement in a number of projects, including the sale of state land to Republican contributors.
Although Gargano was widely thought to have the inside track to become Bush's ambassador to Italy in return for his tireless fundraising activities, the probe evidently raised enough questions to torpedo the appointment.
The investigation was closed without explanation, and without filing of criminal charges, on Jan. 22, 2001.
| Niagara Falls Reporter | www.niagarafallsreporter.com | August 27 2002 |