Police, Correction Unions Invested Through Bruno

JOSEPH L. BRUNO: Feds say he misused office.

Former State Senate Majority Leader Joseph L. Bruno's alleged improper referrals of unions doing business with the state to an investment firm that paid him more than $1.3 million in commissions included two police and two correction unions, according to the Federal indictment against him.

The unions, which according to the indictment may have been unaware of the impropriety, are the Correction Officers Benevolent Association, the Correction Captains Association, the Detectives Endowment Association and the Sergeants Benevolent Association.

Move Coincided With VSF Bill

In the case of COBA, the timing of its involvement was noteworthy, because its annuity fund placed an undisclosed sum of money with Wright Investors' Service, the firm recommended by Senator Bruno, beginning in February 1999. At the time, the union was seeking approval of a bill granting correction officers a pension-related benefit known as a Variable Supplements Fund, which later that year was approved by both houses of the State Legislature and signed into law by then-Governor George E. Pataki over the strenuous protests of Mr. Bruno's fellow Republican, then-Mayor Rudy Giuliani.

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COBA President Norman Seabrook declined through a spokesman to comment on the matter.

Peter D. Meringolo, who was head of the CCA at the time in September 2005 that its annuity fund invested with Wright, did not respond to a call seeking comment.

SBA President Edward Mullins said in a Jan. 30 phone interview that he discontinued his annuity fund's investment with Wright less than a year after he took office in 2002. That move reflected a general dissatisfaction with the returns that all the fund's investments were producing, he said, rather than a specific problem with Wright's performance.

Never Broached by Bruno

He said Mr. Bruno never contacted him about that decision, nor would it have made a difference. "I kind of beat my own drum," Sergeant Mullins said, adding that the Legislature during Mr. Bruno's tenure had produced very little significant legislation that benefited his rank and file.

NORMAN SEABROOK: Was investment a quid pro quo?

"Ultimately our loyalty is to the membership," he said.

Asked if there was anything in the union's files to indicate why the previous SBA administration had invested with the firm advocated by Mr. Bruno, Mr. Mullins replied, "To be honest, I don't know why they chose Wright, but then I don't know why they did a lot of things."

He was not immediately able to determine how much of the annuity fund's investments had been made through the firm.

DEA: Cooperated With Probe

DEA attorney Phillip Karasyk said regarding the investment that union made beginning in June 2007, "We fully cooperated with the investigation, and we don't think it's appropriate to comment any further so long as the criminal investigation is pending."

The DEA did not get involved with Wright until after the 12-year period, from 1994 to 2006, during which the indictment states that the firm paid Mr. Bruno $1,373,000 for his work in referring union clients to it.

EDWARD MULLINS: Discontinued use of Bruno firm.

All told, 16 unions which had business before the state were solicited by Mr. Bruno to have their annuity funds invest millions of dollars with Wright Investors' Service, Federal prosecutors for the Northern District covering the Albany area charge in the indictment. The other unions, which include locals of the International Brotherhood of Teamsters and the Service Employees International Union, represent private-sector workers.

The former Senate Majority Leader from Rensselaer County, who has pleaded not guilty to those and other charges against him, is accused of having, beginning in March 1994, entered into an agreement under which Wright would pay him for each investment advisory client it acquired following his referral. Beginning in August 1998, prosecutors say, Mr. Bruno became a part-time employee of Wright who was listed on the payroll of its parent organization, the Winthrop Corporation.

Says He Concealed Relationship

The indictment states that Mr. Bruno "routinely failed to disclose his status as an employee to officials he contacted," as he was required to under U.S. Securities and Exchange Commission regulations. It also asserts that he "failed to disclose to the public, his fellow Senators, and other government officials that he was contacting union funds on behalf of Wright for personal compensation and enrichment." It goes on to charge him with "falsely leading Wright employees and certain union officials to believe that the existence and nature of his financial relationship with Wright and his privately compensated contracts with union officials had been disclosed to the 'Senate' Ethics Committee." In fact, the indictment states, the appropriate body for such disclosure is the Legislative Ethics Committee, and Mr. Bruno neither informed the panel about his transactions nor sought an opinion about whether they were permitted.

He did, however, according to the charges, "take discretionary official action on legislative, funding, contract, and regulatory issues benefiting the interests of labor unions whose officials he had contacted and solicited on behalf of Wright…"

The VSF Debate

The best-known of those actions was his support of the Variable Supplements Fund for all city correction officers. Mr. Seabrook argued to both the City Council and top state officials that the bill was a matter of equity, pointing out that the benefit, which has since grown to $12,000 a year, was already extended to retired city cops and firefighters.

City officials countered that there was a significant difference: the police and fire unions had obtained the benefit three decades earlier in return for permitting their pension funds to invest in stocks, which had vastly improved the funds' earnings. The correction unions are part of the New York City Employees Retirement System, which had the power to invest in the stock market long before the correction VSF bill surfaced.

Its enactment was considered a major coup for Mr. Seabrook, but a provision of that law that was not included for the police and fire VSFs led to payments being discontinued a couple of years ago because there were insufficient earnings from stock profits to sustain them. Those payments are scheduled to resume, however, by 2019.

Also Got $600G From Brokerage

The indictment also charged Mr. Bruno with having improperly received $632,000 from McGinn, Smith and Co. between 1993 and 2005 as the result of brokerage fees it received from unions, none of which were identified. It stated that in December 1992, the firm sent a letter to Mr. Bruno—who wasn't yet Senate Majority Leader—proposing that he be hired to "assist in the development of money management relationships with 'labor unions, pension plans…' "

He was listed by the firm as a parttime consultant, but prosecutors charge that the only work he did consisted of having "obtained union brokerage business." They also said that his company, Capital Business Consultants, "did not perform any real functions" and that he "directed and utilized state employees to perform administrative, clerical, bookkeeping and legal work related to his outside financial activities."

Mr. Bruno became Senate Majority Leader in early 1995, nearly a year after his relationship with Wright began, and held the post until his resignation last June, something he denied at the time was related to the ongoing Federal probe into his outside business activities.

He had fiercely resisted the demand of then-Gov. Eliot Spitzer for reforms in the outside business activities of state legislators after Mr. Spitzer took office in 2007. The call for ethics reform foundered once the Governor was forced to resign last March amid a scandal concerning his patronizing a high-priced prostitution service.