City Fires the Fastest Probe in Western History

By Sydney H. Schanberg
New York Newsday, December 15, 1987

Last week, in a long and detailed article, the Village Voice laid out the relationship between George Klein, a developer and a landlord who leases space to the city, and Alex Liberman, who was the city’s chief lease negotiator from 1979 until his arrest in 1983 on charges of having granted lucrative leases to landlords who would pay him bribe money.

Liberman finally pleaded guilty and was sentenced and was sentenced in 1984 to 12 years in federal prison for extorting or trying to extort $2.5 million in this fashion. His sentence was later reduced to nine years, reportedly for providing prosecutors with additional information, some of it about George Klein.

Klein is the real estate entrepreneur who has been chosen to be the principal developer for the $2.5-billion redevelopment of Times Square, for which he would receive hundreds of millions of dollars in tax forgiveness — maybe even more than $1 billion — over 20 years.

The Village Voice article — by Wayne Barrett and William Bastone — reported, for the first time, that Klein, at Liberman’s request, had made a $5,000 contribution in 1981 to Liberman’s synagogue in Brooklyn. This gift came just a month after Klein had been granted a 10-year lease, arranged by Liberman, under which the city would pay Klein $6.5 million in rental money for office space for city employees in one of his buildings, an old, run-down seven-story structure at 625 Fulton St. in Brooklyn.

Significantly, the 30-count indictment to which Liberman pleaded guilty showed that getting landlords to give money to his synagogue was one of the methods used by the city official to launder his bribes. Another laundering method was to have the landlord pay a broker’s fee to someone designated by Liberman; the pretense would be that this bogus broker had earned the fee by bringing the building to Liberman’s attention for possible rental by city agencies.

Just such an arrangement came to light in the Klein case. He received a brokerage-agreement letter, the Voice reported, from Herbert Scheibel, Liberman’s long-time attorney. The letter called upon Klein to pay Scheibel a $100,000 fee for the Fulton Street lease — even though Scheibel had had nothing to do with it and Klein knew this.

His explanation as to why he didn’t reject the proposal instantly — he said he had turned it over to his lawyers to let them handle it — leaves much to be desired. From the start, for example, Klein knew that a broker’s fee would have been illegal, for there is a provision in these leases that says the city “dealt with no broker.”

Klein denies that the gift to the synagogue was a payment to Liberman in thanks for the lease. He also denied that he had ever agreed to pay a broker’s fee to Scheibel.

The city’s Department of Investigation and the federal prosecutor’s office in Brooklyn say that they jointly looked into Klein’s dealings with Liberman, apparently as a result of information provided by Liberman, but that, in the words of United States Attorney Andrew Maloney, “We concluded the facts uncovered by the investigation didn’t lend themselves to a successful federal prosecution.”

This conclusion doesn’t give George Klein the Good Housekeeping seal of approval. It simply states that given the fact that Scheibel had died and that the situation now boiled down to Liberman’s word against Klein’s, this wasn’t seen as enough to make a successful case. Fair enough; that’s the way our system should work. Evidence has to be nailed down tight.

But that doesn’t mean that there is now some requirement that we reward George Klein with major city goodies like the Times Square project. He clearly dealt with Alex Liberman and he had to know that the arrangements weren’t exactly benign. If the gift to the synagogue were innocent, why couldn’t it just be mailed to the synagogue? Why did Liberman have to come to Klein’s office to collect it?

When the Village Voice article came out last week, Mayor Edward Koch said he would have the Department of Investigation look into it. In less than 24 hours, the DOI issued a letter saying that the Klein-Liberman dealings had been “thoroughly investigated.” Repeating Maloney’s statement virtually verbatim, the letter said: “The U.S. attorney’s office concluded that the facts disclosed by the investigation did not lend themselves to a successful prosecution.” It was the fastest reinvestigation in the history of the western world. The least they could have done was to go to the thesaurus and change a few of Maloney’s word patterns.

Well, that’s it, folks. That’s the official word. The municipal corruption scandal is over, says City Hall, and we can all move on to bigger and better deals. The press apparently agrees, because the daily newspapers gave scant attention to the Voice’s disclosures.

What message is coming through here? Is it that it’s now okay to return to business as usual?

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