Is Rochester's Big Kahuna, Flaum, Improperly Lobbying to Deliver Low-Grade Casino for Senecas?
By Frank Parlato
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| David M. Flaum, is he a lobbyist? |
The Seneca Nation of Indians has a contract with Rochester real estate investor, David M. Flaum. But the nature of the deal may place both parties in violation of New York State law.
The suspect contract includes a potentially-illegal $3 million success fee, to be paid to Flaum, a Rochester native who refers to himself as an "adaptive re-use developer." The fee is intended to secure governmental approvals for a casino in the Town of Henrietta, a suburb of Rochester, 70 miles from Buffalo.
While Flaum has denied any wrongdoing, the Niagara Falls Reporter uncovered a secret diary documenting a list of meetings between Flaum and governmental officials in Albany and elsewhere which leave little doubt he is functioning as a lobbyist for the Seneca casino.
The list provides evidence that Flaum and the Senecas are working along dusky gray boundaries of New York State lobbying law by having Flaum meet and try to persuade public officials that a fourth Seneca casino, in Henrietta, should be approved, despite the Seneca-New York Compact limiting the Senecas to three casinos.
A state official said that before any casino is built in Henrietta, the compact between the Senecas and the state has to be amended. Page 15 of the compact provides that the nation may only establish gaming facilities in three places: Niagara County, Erie County and any other place on Seneca Territory (accounting for the Salamanca casino).
The contract between Flaum and the Senecas, termed a "master development agreement," provides a $3 million "development fee" to Flaum if the Henrietta casino opens, and a "success fee" of $2.5 million if Flaum secures a new state compact for the Senecas permitting the Henrietta casino to open by Oct. 1, 2014.
Flaum, a registered lobbying client, may find the road to trouble lies with the Joint Commission on Public Ethics (JCOPE) since, while Flaum stands to receive a success fee, lobbyists are prohibited from entering into such contingency deals.
When contacted by the Albany Times Union last summer about this potential conflict, Flaum was evasive: "I can't say a word about it," said Flaum. "I don't know who's trying to create issues."
Flaum was also quoted as saying, "I'm not a lobbyist, I'm a developer. The Senecas negotiated this deal and they have their own lobbyist."
Despite Flaum's denials, the contract includes "government to government relations." Evidence in Flaum's liaison diary dated February, 2014, also suggests he has been lobbying and meeting top officials in Albany and elsewhere who have authority to grease skids and approve what is becoming a growingly controversial and unpopular, unwelcome casino.
Flaum, who donated in excess of $400,000 to various politicians recently, many of whom will have a hand in deciding the fate of a new Seneca Casino, is required to register as a lobbyist before he appears before officials on behalf of the tribe, particularly for a gaming compact.
Flaum, a member of the Republican Jewish Coalition, was a Bush "Pioneer" in 2004 who reportedly donated $100,000 to Bush's inaugural and who sends most of his donations to Republicans. He has, however, chosen several prominent Democrats to be high on his list, foremost of whom is Gov. Andrew Cuomo. Also pegged for Flaum's patronage were US Senators Chuck Schumer and Kirsten Gillibrand, both Democrats, who will be needed for federal approval of the deal which will in effect remove land from New York State to create tax free, sovereign Seneca land in Henrietta.
According to plans, the Henrietta casino will be modest, geared towards locals, and comprise a comparatively small 65,000 square feet of public space, plus food and beverage offerings to compete, tax-free with local businesses. The agreement states that the parties contemplate a $100 million investment by the Seneca Gaming Corp. and a $50 million investment by Flaum for gaming and non-gaming amenities (which is low budget by casino stabndards). A $350 million non-Indian casino is being proposed in the Finger Lakes. (The Mirage in Las Vegas was $630 million in 1989.The Niagara Falls View Ontario resort cost $1 billion )
The Henrietta casino appears to be designed as slot machine-centric and what the gaming industry describes as a "grind" style casino. A "grind" casino is one geared to attract a local/regional group of steady slot machine losers to whom the casino grinds out its profits in small, regular losses to its customers. Much like a neighborhood bar comprised of a mix of social drinkers, semi-alcoholics and alcoholics, the "grind" depends on a cadre of regular losers - some who can afford their losses, some who lose a little more than they should, and some who are true gambling addicts who bet far more than they should, causing their lives substantial pain and oftentimes financial ruin.
The casino owner, being predatory by nature, requires all three types. The "grind" formula uses low-odds slot machines and low overhead to add up to enormous profits - the hallmark of Seneca casinos.
One of the features of the grind is to install slot machines whose payoff percentages can be changed regularly right from the floor to cater to types and sizes of crowds.
Presently, Flaum has two lobbyists working for him in Albany: Justin McCarthy and Georgio DeRosa. The Senecas have hired the firm of Hinman Straub at the rate of $15,000 monthly and Anthony Masiello at the rate of $10,000 monthly.
Flaum, who has never developed a ground-up project of this magnitude, typically buys buildings in bankruptcy, updates them, then rents them to commercial tenants.
He describes himself as "a very philanthropic person."
Flaum's self-described philanthropy is not only evidenced by his gifts to the politicians with whom he does business, but, like many of the noveau riche, he also donates to charities in exchange for getting naming rights. The University of Rochester Eye Institute, for example, in consideration of a sizable monetary sum, renamed itself the David and Ilene Flaum Eye Institute.
Flaum has been working to secure an Indian casino deal for the past 14 years. In 2006 he was named in a lawsuit over his efforts to turn the Concorde Hotel in Sullivan County into a gaming facility.
Flaum remains involved in efforts to bring Indian gaming to Sullivan County, where the state has tentatively approved the building of two casinos.
He said he does not plan to bring the Seneca nation there.
While admitting to the Town Board of Mamakating that the Senecas are "friends of mine" and "I work with them here and there," he told the board that he plans to bring in "a good gaming company" for his resort style casino there.
While the site of the Henrietta casino has not been identified, Capitol Gaming LLC recently signed a contract to purchase a largely vacant former meat packing plant in Henrietta known as the First Prize Center. Records show Capital Gaming has the same mailing address as Flaum's company, Flaum Management. The 32-acre property was listed at $5 million.
Not everyone supports the Henrietta casino. The Henrietta Town Board is on record as opposing it. Last month, the Wyoming County Board of Supervisors passed a resolution also opposing the plan. Additionally, the Orleans County Legislature voted in December to oppose the casino. Rep. Louise Slaughter, (D), 25th Congressional District, who represents the district, said, "I was talking to a bunch of people on a bus going to a casino where I'm sure they have a lot of fun and sometimes I think people ought to just stay home and send them their money. There's hardly any point in going. We know who's going to win."
Last week a spate of robo calls made to Henrietta residents warned of a "secret" meeting to advance a Seneca-run casino. It prompted more than 100 people to pack the town hall. At the town hall meeting Henrietta supervisor Jack Moore said he had not heard from the Seneca Nation or developer David Flaum, telling the crowd, "We do not have a proposal to discuss at this time. But we do welcome people's input and will listen to anything you have to say."
When resident David Mallone said, "I think there are a lot of bad results from gambling and gambling casinos. I think it would be bad for Henrietta," the audience applauded.
When asked if he would support a casino, Supervisor Moore said "If I had a personal vote in this- just Jack Moore - I would say that we could probably do without the casino. But I have to be objective and listen to everything."
Among officials Flaum has either met or plans to meet are NYS Assembly Majority Leader Joseph Morrele, a list of Albany bureaucrats and members of the governor's staff, Town of Irondequoit Supervisor Adam Bello, NYS Gaming Commission Acting Executive Director Robert Williams, NYS Senator Joseph E. Robach, NYS Senator Patrick M Gallivan, NYS Senator Ted O'Brian, Finger Lakes Regional Economic Development Council Chairman Joel Seligman, Regional Director Vincent Esposito, Monroe County Executive Maggie Brooks, Deputy County Executive Dan DeLaus, Local Economic Development and Tourism Greater Rochester Enterprise President and CEO Mark Peterson, and Visit Rochester President and CEO Donald Jefferies''
One curious stroke of language in the leaked document shows Flaum, the lobbyist, suggesting that part of his duties is to give local politicians "cover" for doing what's best for his interests. Flaum writes he wants to make a "presentation to the Henrietta community as soon as possible to make them aware of the benefits of the project and give the town board 'political cover.'"
(Check in for part two next week where we will attempt to unravel the depth of the political contributions and the rewards anticipated or received by Mr. Flaum, as well as a deeper insight into his efforts to persuade various officials to give him preferences in Henrietta and elsewhere.)