State cites CEDC for ‘potential conflicts’

New report clears land deal but faults directors, naming four

GREENPORT–A state agency with oversight responsibility for the Columbia Economic Development Corporation (CEDC) released a report this week that says the CEDC acted properly in transferring 33 acres owned by the CEDC in Ghent and Claverack to the company that plans to build a large warehouse facility for Ginsberg’s Institutional Foods, Inc.

The land was transferred for $1 in 2014, although it was purchased by the CEDC in 1997 for $109,000 in public funds. It was later appraised at $280,000.

But the report, a formal investigation by the Authorities Budget Office, concluded that three prominent businessmen and a local lawyer who served on the CEDC board of directors had potential conflicts of interest because of their connection to the Ginsberg’s Foods deal. The report says the four did not follow the CEDC’s own procedures, which call for disclosing the financial involvement with the project in writing and recusing themselves from discussions of the project.

The state investigators also found that the CEDC did not adhere to the state Open Meetings Law and conducted their deliberations on the Ginsberg’s project without offering the public the opportunity to observe the decision making process, which included approving millions of dollars in financial assistance for the project.

The CEDC issued a statement Tuesday, April 28, the day after the report was released, saying the organization “is pleased that the report finds that the proposed transfer of CEDC property to Ginsberg Foods was consistent with the applicable provisions of the NYS Public Authorities Law.”

The statement also said, “CEDC will take steps to maintain more comprehensive minutes of CEDC board meetings to reflect who has recused them self or withdrawn from participation in discussions.”

Addressing the $1 transfer of land, the CEDC statement said that the deal for the land also included a “Penalty Note and Mortgage, which requires Ginsberg’s to pay up to $280,000 if certain performance benchmarks were not met.” The benchmarks include the completion of construction and occupation of 65,000 square feet of space, much of it a cold storage warehouse, in three years. Half that amount would be due CEDC if structures with an additional 140,000 square feet are not built at the site within the next decade. The site is across state Route 66 from the south end of the county airport in West Ghent.

The CEDC statement says the organization “appreciates” the investigation and will include the recommendations in is future procedures.

The statement did not directly address the apparent conflicts of interest by its board members, although the state investigators said they found it “troubling” that among members of the board who would directly benefit from the Ginsberg’s project there was a routine disregard for disclosure of those potential conflicts, even though disclosure is required by the CEDC’s Code of Ethics.

The eight-page complaint that triggered the report was filed by GhentCANN, which describes itself as “an unincorporated association of citizens, taxpayers, property owners, voters, and other residents of Columbia County.” The complaint form, filed October 14, 2014, is signed by Patti Matheney Schrom, a Ghent resident and citizen activist.

All four of the individuals on the CEDC board singled out by the Authorities Budget Office (ABO) report failed to file written reports disclosing their financial interest in the Ginsberg’s project, a CEDC requirement. One of them, David Ginsberg, is the chief executive of Ginsberg’s Foods, who was a member of the CEDC board and Executive Committee until he resigned in October 2013. But the report says Mr. Ginsberg, when he was on the board, did recuse himself from discussions of his project and assigned another officer of his company as the CEDC contact.

CEDC president David Crawford did not file a report disclosing that the engineering company he heads was advising Ginsberg’s on the project. The report says investigators were told that he verbally disclosed his role in the project. That would have been reason for him recuse himself from discussions of the project. But the report says, “We found instances in meeting minutes where Mr. Crawford did participate in discussions and voted on issues related to the project.”

Robert Sherwood, the president of Kinderhook Bank and formerly the bank’s CEO, is CEDC treasurer and sits on the Executive Committee. According to the report, “In April 2014 Kinderhook Bank provided Ginsberg Foods with two loans totaling $9.5 million for its proposed expansion project. The CEDC property was the collateral for the loans.” It goes on to say that he did not disclose this in a written statement and he participated in discussions of the project.

The fourth member of the board discussed in the report is lawyer William Better. He received $22,375 from a sister organization of the CEDC, the Columbia County Industrial Development Agency (CCIDA), “to negotiate the CCIDA’s financial assistance package with Ginsberg Foods,” the report says, adding that he did not disclose this in writing. “Mr. Better indicated that he had not participated in discussions on the Ginsberg Foods project; however the minutes do not state the reason for his lack of involvement in discussion,” the report says.

The ABO faults the CEDC board, saying, “Board members demonstrated a lack of awareness of their adopted policies concerning the disclosure of potential conflicts of interest.” The state agency concludes that “No harm has yet arisen from the board’s failure to follow its own policies since the Ginsberg Foods expansion project was not approved by the Ghent Planning Board.

“This may not always be the case with future projects.”

Ms. Matheney said Wednesday that she plans to send a copy of the report to the Office of the State Attorney General. She said she did not yet know whether GhentCANN would take further action.

The full report is available online at:

www.abo.ny.gov/reports/compliancereviews/CEDCFinalReportofPublicComplaint2015.pdf

 

 

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