When law enforcement officials busted 70 mid-level NYCHA bureaucrats on bribery charges last week, they touted the sweep as the biggest single-day takedown in Department of Justice history — a very public splash meant to send a clear anti-corruption message.
It appears that NYCHA’s top managers received — and rejected — a similar message years earlier when the city Department of Investigation (DOI) looked into the same issue: bribes paid to superintendents and assistant superintendents to score small contracts of less than $10,000 for repairs without competitive bidding.
In a Sept. 17, 2021 letter, the DOI notified then-NYCHA Chair Greg Russ that it had referred the findings of their investigation to law enforcement for criminal prosecution.
Ralph Iannuzzi, the DOI inspector general overseeing NYCHA, specifically recommended that Russ end the practice of allowing front-line superintendents to award small no-bid contracts at will with no oversight to “prevent further abuses.”
Russ and then-NYCHA General Manager Vito Mustaciuolo, who was CCd on Iannuzzi’s letter, responded with a top-level thumbs down, at first ignoring and then ultimately refusing the suggestion altogether.
More than two years and 70 arrests later, the unprecedented NYCHA takedown was announced with great fanfare and fireworks. The full-tilt media rollout hosted by Manhattan U.S. Attorney Damian Williams included a map with colorful dots to make clear that this specific type of alleged bribery had taken place all over the city, at nearly 100 NYCHA developments.
But in all the speeches about cracking down on the “culture of corruption” at NYCHA — and in 476 pages of criminal complaints — not a single top level NYCHA manager was mentioned. All of the focus remained on lower level employees.
What remains unanswered is how all of this alleged bad behavior could have gone down without NYCHA’s top executives knowing about it — particularly because they’d been warned about the potential for this specific vulnerability on several occasions by multiple parties.
Rep. Ritchie Torres (D-Bronx), a former chair of the City Council’s Committee on Public Housing who grew up in NYCHA’s Throggs Neck Houses, made this point shortly after the big takedown.
“One case of bribery or a few cases of bribery can be explained away as outliers,” he said. “But 70 cases of bribery, affecting one-third of NYCHA properties, points to a systemic failure of management and oversight. It points to a culture of corruption.”
Torres should know. Five years ago, when he was on the Council, he responded to an October 2019 investigation by THE CITY that found $250 million in micro contracts going to a small cabal of vendors, including a firm called Matrixx Inc. run by an ex-NYCHA superintendent that had been singled out by DOI over allegations of shoddy and possibly non-existent work. THE CITY’s report spelled out the potential for corruption that was embedded into the protocol of allowing these front-line managers the ability to hand out contracts with absolutely no oversight.
At the time Torres demanded changes. Nothing changed.
“For five years, I have been sounding the alarm about NYCHA’s chronic lack of oversight over no-bid contracting, which can easily become a breeding ground for fraud, corruption, and abuse,” he said last week.
The System Was Vulnerable
Two years after THE CITY’s 2019 report, Torres’ original prediction came true: DOI and Brooklyn District Attorney Eric Gonzalez announced the arrest of nine contractors who’d received millions of dollars in no-bid micro-contracts from NYCHA.
In that September 2021 case, a NYCHA superintendent had gone to DOI to say some vendors had offered him bribes. DOI sent in undercover agents posing as NYCHA superintendents at Brooklyn developments and secretly recorded audio and video of vendors handing over envelopes of cash and bottles of pricey Johnnie Walker scotch.
Announcing the arrests, then-DOI Commissioner Margaret Garnett noted that although in this case a NYCHA staffer had done the right thing, the system as it existed “was also highly vulnerable to fraud and corruption.”
She noted a peculiar trend baked into the micro-contract awards process. Because bribes were based on a percentage of the contract, there was a tremendous incentive to inflate the amount of the contract to just under $10,000, even if the job takes an hour and isn’t worth nearly that much.
To remedy the system’s ills, Garnett made specific recommendations to NYCHA she hoped would stop this practice and add real oversight to the awards process, including:
- Removing front-line superintendents from awarding these contracts and turning that over to the central procurement unit.
- Preventing overbilling by contractors charging close to the $10,000 limit for trivial jobs by creating a “fixed price list” of typical repair costs and checking the work that’s actually performed.
In an interview with THE CITY at the time, Garnett was optimistic.
“Russ and Vito have been very supportive,” she said, adding that she was “expecting to hear NYCHA adopting these recommendations.”
It didn’t happen. Instead the two top NYCHA executives rejected both of DOI’s suggestions, starting with taking the superintendents out of the process.
The reasoning, at the time, was that no-bid contracts allowed repairs at apartments to happen faster, and NYCHA was struggling in vain to attack a huge backlog of repair requests for everything from busted plumbing to collapsed ceilings.
Russ and Mustaciuolo also assured DOI that after the arrests of the contractors, superintendents were getting more ethics training. Plus, NYCHA insisted, they were doing better background checks on vendors.
Last week after the arrest of 70 current and former employees, the housing authority said in response to THE CITY’s questions about why they didn’t adopt DOI’s suggested reforms in 2021, “NYCHA did not implement the recommendation to remove micro-purchases as a property management tool in an attempt to continue prioritizing the daily operational needs of residents and the building portfolio.”
“NYCHA had felt strongly that there needed to be flexibility at the development level to secure the fastest possible services for residents, particularly in moments of emergency — and micro-purchases are an avenue commonly used by public housing authorities for achieving this.”
NYCHA management also rejected DOI’s recommendation to prevent overbilling for small jobs that bill right up to the $10,000 limit, declining to adopt DOI’s “fixed price lists” of typical costs for repairs such as “price per foot” of tile or average cost for replacing bathroom fixtures.
Then a shift occurred behind the scenes. More than two years after DOI’s suggestions — after Russ and Mustaciuolo were no longer running the agency — NYCHA in November 2023 informed DOI that they had begun requiring vendors to itemize their work in invoices to better understand what they were paying them for.
But in between the time NYCHA’s management rejected DOI’s suggestions and the date they began taking a harder look at the “just under $10,000” contracts, more corruption emerged. DOI’s continuing investigations again became public in November 2022 when two NYCHA superintendents pleaded guilty to federal charges of taking bribes to award no-bid micro contracts.
That was just a hint of what was to come.
More than a year later on Feb. 6, Manhattan U.S. Attorney Williams and a host of federal and city law enforcement officials arrested 70 current and former superintendents and assistant superintendents for allegedly taking bribes.
Addressing the media, Garnett’s successor, DOI Commissioner Jocelyn Strauber, stepped up to the microphone in a bit of a deja vu moment, announcing that DOI was once again making recommendations for reform — 14 in all, including the same suggestions NYCHA had earlier rejected.
Within hours, NYCHA’s current CEO, Lisa Bova-Hiatt, promised the agency would do whatever DOI suggested this time.
Regarding DOI’s recommendation to end the practice of letting superintendents award no-bid micro contracts and all of DOI’s latest suggestions, Barbara Brancaccio, Chief Communication Officer for NYCHA, said the authority will now embrace a different, more welcoming approach:
“After this clear violation of trust and misuse of authority, and as part of NYCHA’s ongoing and collaborative efforts alongside DOI to reduce fraud and abuse of micro-purchases, we will now implement DOI’s full suite of recommendations.”